March 6, 2018 / 7:58 PM / 2 months ago

Kobe Steel, Toyota hit with U.S. lawsuit over vehicle metal quality

NEW YORK/TOKYO (Reuters) - U.S. consumers have filed a lawsuit against Kobe Steel Ltd (5406.T) and Toyota Motor Corp (7203.T) accusing the companies of violating consumer protection laws and engaging in fraud by concealing the use of substandard metal components in vehicles.

The Kobe Steel (Kobelco) logo is seen on the company's headquarters in Kobe, western Japan October 24, 2017. Picture taken October 24, 2017. REUTERS/Thomas White

The proposed class-action lawsuit represents the first U.S. consumer complaint filed against Kobe Steel over data fraud, and highlights the legal risks the company faces even after Chief Executive Officer Hiroya Kawasaki announced on Tuesday he would quit to draw a line under the scandal.

The 112-year-old company, which supplies steel and aluminum parts to manufacturers of cars, planes and trains around the world, admitted last year to supplying products with falsified specifications to around 500 customers, throwing global supply chains into turmoil.

Kobe, Japan’s third-largest steelmaker, said on Tuesday that the data fraud had gone on for nearly five decades, and that it found new cases of impropriety, widening the number of affected clients to 605, including 222 overseas. The company said Kawasaki would quit on April 1.

The U.S. lawsuit, filed on Monday in federal court in San Francisco, was brought by two California residents who seek to represent a nationwide class of consumers who bought allegedly defective Toyota vehicles.

According to the complaint, Toyota’s Prius, Camry, Land Cruiser and Lexus vehicles have all been manufactured with “sub-standard” steel, aluminum and copper.

The plaintiffs allege that Toyota and Kobe Steel both violated federal and state consumer protection laws by claiming that the vehicles complied with U.S. quality standards.

“We have not grasped the whole content of the case and we are now looking into the matter,” a Kobe Steel spokesman said on Wednesday.

Toyota declined to comment on the lawsuit.

In a special order in November, the U.S. National Highway Traffic Safety Administration asked 29 automakers, including Toyota, to disclose any safety issues for any of their vehicles or engines containing products supplied by Kobe Steel.

The regulator did not immediately respond to a request for comment on what data it had received in response and whether there was any evidence of faulty materials in Toyota cars.

Monday’s 40-page lawsuit outlines the ways in which the companies allegedly concealed poor metal quality. It demands compensatory and punitive damages of an unspecified amount.

According to the complaint, at least six Toyota car models sold or leased to U.S. consumers were manufactured with substandard metal from Kobe Steel. Plaintiffs said the metal could impact vehicle safety and performance.

Toyota had the duty to disclose any defective vehicle components because it has consistently marketed its automobiles as safe, functional and reliable, the lawsuit says.

Kobe and Toyota had superior knowledge and access to the facts, the lawsuit alleged, giving rise to fraud by concealment claims.

Four individuals in Canada who bought cars that use Kobe’s products have already brought class-action lawsuits seeking unspecified damages against Kobe and it subsidiaries.

Kobe is also undergoing a separate U.S. Justice Department probe.

A company executive said on Tuesday that it is fully cooperating with the U.S. probe, but it was hard to predict how it would develop.

    Reporting by Tina Bellon in NEW YORK and Yuka Obayashi in TOKYO; Additional reporting by David Shepardson in WASHINGTON; Editing by Matthew Lewis and Christian Schmollinger

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