Shelly Banjo is a Bloomberg Gadfly columnist covering industrial companies and conglomerates. She previously was a reporter at Quartz and the Wall Street Journal.

It can be hard keeping all the corporate scandals straight.

The unfolding drama at Japanese conglomerate Kobe Steel Ltd., which falsified quality control tests on metals from aluminum to copper, has evoked comparisons to another black eye in Japan Inc.'s string of malfeasance -- Takata Corp., whose exploding airbags were linked to more than a dozen deaths.

Like Takata, Kobe's wrongdoings stretch back years, possibly decades. Executive misconduct is a major culprit. And as more details emerge, Kobe's stock sinks ever lower.

Smart investors know when there's blood in the water, it's important to differentiate between a dead body and a flesh wound. There's a good chance Kobe turns out to be the latter.

Car Repair Kit
VW shares have returned 27 percent in the last two years, as the stock recovers from the carmaker's diesel emissions scandal
Source: Bloomberg

Take what happened at Volkswagen AG or Mitsubishi Motor Corp. Shares of both plunged after the automakers admitting to cheating on diesel emissions and fuel-economy tests, respectively. Both paid billions of dollars in fines for deceiving regulators and customers, and executives were ousted.

However, as Jefferies Group LLC analyst Thanh Ha Pham pointed out in a recent note, the duo's stocks are climbing again. Investors who waded in during the worst of the turmoil have ended up doing pretty well.

Rearview Mirror
Shares in Mitsubishi Motors have surpassed where they were before its latest corporate scandal
Source: Bloomberg

No doubt, falsifying the strength and durability of copper and aluminum used in cars, trains and planes that transport billions of people around the world is disgraceful. But no one's died, yet.

End consumers don't tend to feel the same connection with raw materials providers as they do with customer-facing brands, and Kobe can probably repair its relationship with the likes of Toyota Motor Corp. and Boeing Co. Fines will eat into profits, but drawn-out class action suits are unlikely.

Investors who stick around might be rewarded.

There is a good chance the scandal drives out management who were either asleep at the wheel or dishonest in the first place.

New blood could help usher in better corporate governance practices for this 112-year-old firm. With businesses spanning real estate to power plants, Kobe still operates like it's more concerned with empire building than shareholder returns.

As we saw with Mitsubishi Motors, corporate messes are often followed by a rash of deals.

To help pay for fines, Kobe could sell some of its non-core operations. Fresh faces at the top may be more inclined to spin off Kobe's namesake steel business than current CEO Hiroya Kawasaki, who came up the ranks via steel and has been reluctant to break up the trading group.

Falling Short
Kobe Steel's shareholder returns rank below average among Japan's industrials and materials firms
Source: Bloomberg
Note: Shareholder yield is based on dividends, share repurchases and debt repayments. Encompasses 195 industrials and materials companies in Japan with a market value of $1 billion or more.

Kobe isn't a significant player in Japan's steel industry after mega-mergers formed JFE Holdings Inc. and Nippon Steel & Sumitomo Metal Corp., as Gadfly's David Fickling notes. Jettisoning the business would allow management to focus on aluminum, copper and other units that are actually doing pretty well. That could in turn lead to higher profits, and better shareholder returns.

Amidst all the negative headlines, investors may be tempted to call it quits. But that would be wasting a good crisis.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Shelly Banjo in Hong Kong at

To contact the editor responsible for this story:
Katrina Nicholas at