On Wednesday, Toshiba President Satoshi Tsunakawa announced that Toshiba would be dumping its United States nuclear power arm, Westinghouse. The move by the Japanese conglomerate is not a surprising one as the company declared in December 2016 that it had lost billions in trying to keep the nuclear arm active.
How it all began
Toshiba is a world-renowned tech company. In Japan, the company has overcome milestones- it was the first firm to produce a light bulb, and the one which came up with Japan’s first microwave ovens. Later the company diversified and established an international reputation in building laptops and NAND chips.
In 2006, Toshiba bid for Westinghouse and the deal was sealed at 5.4 billion US dollars. Toshiba at that point wanted to get into the nuclear business. Westinghouse was profitable for a time until 2011 when it purchased CB&I Stone and Webster, a nuclear energy construction company. Westinghouse was set to begin building two nuclear sites- one in Georgia and another in South Carolina.
The construction business fell through, and Westinghouse began recording delays in payments and cost overruns in its overhead costs. Furthermore, as Toshiba revealed today, the US-based company overvalued its assets in borrowing. Suddenly the company began raking in losses. Kazunori Ito, an equity analyst at Morning Star, said, “I think the loss was a result of the severity of the nuclear market at the time.” Ito was referring to the Japanese attitude toward nuclear energy in 2011.
Toshiba now estimates the loss caused by its US arm to be about 1 trillion yen (9 billion USD).
The Crisis
Toshiba, which deferred audited earnings twice, is now at risk of being delisted from the Tokyo stock exchange. Added to its current precarious financial position is the 2015 1.2 billion USD theft scandal that Toshiba had undergone. The loss that Toshiba suffered from Westinghouse has led analysts to ponder on whether the company can actually recover. However, there is some hope for the company as the Japanese government will not let it close down on the basis of the company’s job creation and pioneering history in the country.
Toshiba Declares Westinghouse Bankruptcy
Toshiba is officially writing off Westinghouse as its company. Filing for bankruptcy under Chapter 11 filing will allow Toshiba to distance itself from any future losses that Westinghouse may incur. The filing will also reflect that Westinghouse is not under Toshiba.
A spokesman from Toshiba also clarifies that Toshiba ‘dumping’ its US arm did now mean that the company would also write off the UK arm of Westinghouse. Toshiba is still assessing the feasibility of the UK holding thus its plans for the holding are not decided.
As of now, Toshiba’s stock prices have fallen by over fifty percent after the crisis was first announced in December.
Toshiba is optimistic about regaining it past prestige and financial position, its president Tsunakawa said. The company is planning to sell a stake in its prestigious NAND chip-making business. Tsunakawa expects that deal to rake in at least 2 trillion yen (18 billion USD) which will be enough to recoup losses and start over.
