TOKYO — Japanese technology giant Toshiba Corp.’s last-gasp strategy for staying afloat – selling its prized computer chip operations – may buy the company time but is no cure-all.
Toshiba is Japan’s 140 years old energy and electronics giant. It will lose its most profitable and promising businesses but will still remain with the nuclear units that brought the demise.
Toshiba has its grounds from the time of telegraphs and arc lamps in 1880s. It was struck was hard luck and mismanagement but has warned of “substantial doubt about the company’s ability to continue as a going concern.”
In retrospect, Tokyo-based Company’s first mistake was the purchase of U.S nuclear unit of Westinghouse in 2006. It was filed for bankruptcy protection last month. Huge accounting problems and accounts from former Toshiba employees show persistent problems with its management. Toshiba was scared to lose its shares, so they reported a 950 billion yen ($8.4 billion) net loss for the fiscal year ended in March. These results were released without the approval of the auditor.
TOSHIBA FROM SUCCESS TO DISASTER
As Japan rose to an industrial power, Toshiba rose with it. One of its founders, Ichisuke Fujioka, brought the idea to Japan and formed a cooperation with Genera electric.
It was the first one in Japan to develop radar, microwaves, electric rice cookers and laptops. It invented flash memory, the widely available computer chip used in phones, cameras and other gadgets. Computer chips are its most profitable business. Toshiba was in nuclear business since 1970, years before the nuclear unit purchase from British Nuclear Fuels Ltd.
At that time U.S government was more into the construction of reactors. China was doing huge expansions of atomic energy. According to the analysts Toshiba was paying more than it should. Acquisitions like Mitsubishi Estate’s purchase of Rockefeller center and Sony’s of Columbia Pictures, were also a flop. Referring to these Toshiba’s then Chief Executive Atsutoshi Nishida said “I’d like to make this the first success story,” In March 2011 three reactors at the Fukushima Dai-ichi plant sank after deadly tsunami stuck Japan’s northeastern coast. Two of the six reactors there were built by Toshiba. That was the turning point in industry as some nations discontinued the production of new nuclear plants. After all these years most reactors in japan are sitting around needing serious safety checks.
Toshiba’s troubles aren’t confined to its nuclear business. Toshiba’s problems are not just about the nuclear business. Before 2011 several employees were interviewed by the Associated Press and they said that they have noticed loss of accountability at Toshiba.
Morokuzu joined the company in 1970. He disapproved the misuse of company’s money. Higher authorities disliked him as some used company cars for their personal use. He respected those who used cabs and paid themselves.
“It’s a problem when the border between your own purse and the company purse becomes blurred,” Morokuzu said. “I feel so sad. The brand has been tarnished. I hope Toshiba can pull together.”
In 2015, Toshiba recognized that it had been systematically misrepresenting its books since 2008, as managers tried to meet excessively ambitious goals. An inquiry by an outside panel found profits had been exaggerated and huge expenses concealed across the board.
Koichi Okamoto, a professor of sociology at Toyo Eiwa University and governance expert who has researched Toshiba’s problems, faults the company’s senior leaders. “If leaders at the top start violating compliance, then no one can stop them. So bosses shouldn’t talk too much about making profits because that is already understood,” he said. “Big or small, companies like that will eventually go down.”
As the nuclear disaster developed Toshiba was under its hard working leadership of Nishida. Nishida was at the top since his successful T1100 notebook computer project. While Nishida was CEO, Company was focusing on two of its expanding businesses. Nuclear power and computer chips. Their aim was to temper the ups and downs of the volatile semiconductor sector with comparatively steady growth in the nuclear business. Toshiba started losing its ground when low cost Chinese manufacturers and high-end Korean brands came into the electronics business. Dell, Apple, Acer of Taiwan and China’s Lenovo started taking big market shares in personal computer business.
Over the past year Toshiba had sold its household appliance business to Midea Group of China, who are using its brand name. Also it has sold its medical equipment business to Japanese camera maker Canon.
Toshiba’s Westinghouse deal was a risk right from the beginning. Former Toshiba engineer said Nishida was over confident despite not having any background in the industry. Despite of the rising costs at Westinghouse, even after the Fukushima disaster, Toshiba’s top management was still sticking to the idea of nuclear “renaissance”.
The strict safety regulations after the Fukushima disaster and extra complications of the new reactors added more problems for the Westinghouse. Problems increased when Westinghouse bought nuclear contractor CB&I Stone & Webster in December 2015. It was an effort to proclaim control over delayed and costly projects.
Toshiba is on second number in manufacturing flash memory chips. In April it accelerated their sale of chips to repair the financial losses.
Taiwan’s Hon Hai, which owns Apple iPhone maker Foxconn, was apparently keen to buy the chips business. Also Toshiba’s joint venture partner Western Digital and a U.S.-Japanese-government supported the group.
Western Digital has required negotiation over the planned sale, looking for the right to negotiate with Toshiba. If Toshiba persists in its infrastructure operations, such as railways, power systems and factory automation, and its nuclear power business, given its responsibility for running and neutralizing 17 reactors in Japan, including those at the Fukushima plant.
Current Toshiba President Satoshi Tsunakawa says the Westinghouse purchase was a mistake and has sworn not to take on new nuclear projects. The company says it is in view of selling Westinghouse, but even if it does Toshiba must still bear some Westinghouse-related costs. Toshiba is facing 20 lawsuits in Japan filed by banks, people, foreign investors and other parties looking for damages totaling 50 billion yen ($450 million). The company is suing Nishida and four other former Toshiba officials for 300 million yen ($3 million) in compensations for losses resulting from false bookkeeping. Nishida and the others deny any allegations.
Goto, who now compete with nuclear power, compares reactors to disabled patients, who must be cared for and eventually properly buried, a long task for the industry.