16 Mars 2017
March 15, 2017
Embattled Toshiba Corp. announced on March 14 that it might sell failing U.S. subsidiary Westinghouse Electric Co. LLC in order to tackle a predicted loss of 712.5 billion yen, but the Japanese electronics giant may struggle to find a new buyer.
Furthermore, there is also a real risk that Toshiba might be delisted from the Tokyo Stock Exchange if it fails to release its third-quarter earnings for 2016 by April 11, having already postponed the deadline twice. Looking ahead, there is no doubt that Toshiba faces huge challenges, but in a press conference held at the company's head office in Tokyo on March 14, CEO and President Satoshi Tsunakawa was resolute, stating that "I will strive toward turning this company around."
In trying to reverse Toshiba's fortunes, it seems that Tsunakawa wants to start by detaching the company from its U.S. nuclear subsidiary Westinghouse. Toshiba bought Westinghouse for a relatively bargain price of over 600 billion yen in 2006, but the U.S. company has since incurred massive losses related to nuclear projects in the U.S., owing to factors such as cost overruns and delays as well as stricter safety regulations following the Fukushima nuclear disaster in March 2011.
Although Tsunakawa did not categorically state that Toshiba will sell Westinghouse during the press conference on Tuesday, the implication was there. "We will eliminate the risk of nuclear business projects overseas," the CEO told journalists and analysts.
However, assuming that Toshiba will go ahead and try to sell its failing nuclear unit in the U.S., it will be difficult to find a willing buyer. As a senior executive at Toshiba points out, "No company would buy Westinghouse in its current state." With this harsh reality in mind, it is possible that Westinghouse might have no choice but to file for Chapter 11 bankruptcy protection in the U.S. first, before a new buyer can be sought.
At the press conference on March 14, Tsunakawa was asked about the possibility of Westinghouse filing for bankruptcy, to which the CEO replied, "We are considering various scenarios and we are aiming to eliminate the risk of (the nuclear business project)." His response implies that Toshiba is looking for complete detachment from Westinghouse, and that it is aiming toward the U.S subsidiary filing for bankruptcy.
However, if this happens, it will not be a straightforward exit for Toshiba. For example, if ongoing nuclear plant construction projects in the U.S. are suddenly discontinued, then Toshiba may be sued for compensation by relevant parties in the U.S.
Additionally, it is also thought that if Westinghouse were to file for bankruptcy, Toshiba would have to pay additional costs in the region of 260 billion yen, as a result of having to guarantee Westinghouse's debts. During the press conference on March 14, the Japanese company's senior executives were repeatedly asked about the potential impact of Westinghouse going bankrupt, but they were somewhat evasive, replying that, "It is difficult to comment on a hypothetical scenario."
However, regardless of what happens regarding Westinghouse, Toshiba did announce on Tuesday that it intends to completely exit the U.S. nuclear sector during fiscal 2017, and also sell off its flagship semi-conductor business unit. Toshiba officials claim optimistically that they can convert the company's operating income from a 410 billion yen deficit (as of March 2017) into a 210 billion yen profit by March 2020, by focusing more on social infrastructure projects and by moving away from the U.S. nuclear sector.
However, this will not be easy at all. An economic analyst points out that if Toshiba starts to focus once again on its social infrastructure business such as elevators and railway systems, and withdraws from overseas markets, then it cannot expect to make huge profits. Looking ahead, the expected road forward for Toshiba might appear to be less cluttered than before, but by being more narrow, will it be the right path to take? (By Yuki Ogawa, Business News Department)
March 14, 2017
Toshiba To Speed Up Consideration Of Westinghouse Nuclear Business Sale
14 Mar (NucNet): Japan’s Toshiba Corp said on 14 March 2017 it will speed up looking at whether it should sell a majority of its US-based Westinghouse nuclear power business. Toshiba plans to review the positioning of Westinghouse and “aggressively consider strategic options for it”, the company said in a regulatory filing. It also said it is aiming for an operating profit of around $1.8bn (€1.6bn) in the year starting April 2019 –a target that excludes Westinghouse and Toshiba’s flagship memory chip business which it has put up for sale. Toshiba said last month it expects to book a loss of $6.2bn from Westinghouse in the third quarter of fiscal year 2016. The expected write-down was caused largely by an overestimation of projects at CB&I Stone & Webster, a US construction-service company specialised in nuclear power projects, purchased by Westinghouse in January 2016. There have also been reported cost overruns and delays relating to the construction of the Summer nuclear power station in South Carolina and the Vogtle station in Georgia in the US. There are two AP1000 units under construction at both sites. Toshiba has said it plans to focus on its nuclear fuel and equipment supply businesses and will not provide engineering, procurement and construction contractor services for future overseas projects. Toshiba said it intends to reduce risk at nuclear projects in progress by implementing comprehensive cost reduction measures. The company said it will consider participating in the Moorside new-build project in Cumbria, northwest England, but “without taking on any risk from carrying out actual construction work”.