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TEPCO: No time for personnel feuds

May 12, 2017

As I See It: Six years later, no time for TEPCO personnel squabbles

https://mainichi.jp/english/articles/20170512/p2a/00m/0na/014000c#cxrecs_s*

 

Six years since the outbreak of the nuclear disaster at Tokyo Electric Power Company (TEPCO) Holdings Inc.'s Fukushima nuclear plant, the utility still faces massive challenges. And yet, what I've come to see through my reporting is that efforts meant to help revitalize the company's finances in order to secure the funds needed to bring the nuclear crisis under control and compensate victims, have been overshadowed by petty feuds over personnel appointments between executives dispatched by the central government -- which effectively owns the company -- and dyed-in-the-wool TEPCO employees. Rebuilding TEPCO will be impossible if such squabbles are not put to rest.

In March of this year, TEPCO announced an outline of its revitalization plans, with a restructuring of its nuclear power business as a central pillar, as well as a reshuffling of executive personnel. According to the announcement, chairman Fumio Sudo, 76, will be replaced by Takashi Kawamura, 77, the previous chairman at Hitachi Ltd., and president Naomi Hirose, 64, will be replaced by 53-year-old board director Tomoaki Kobayakawa.

After the nuclear crisis began in March 2011, TEPCO was effectively nationalized. The plan has been for TEPCO to increase its earning power by rebuilding its finances under the central government's management, so that it could secure the funds necessary to decommission the reactors at Fukushima No. 1 Nuclear Power Plant and compensate victims of the disaster.

With the nationalization of TEPCO, the government swept the utility clean of all its old executives and in addition to placing bureaucrats from the Ministry of Economy, Trade and Industry (METI) on the company's board, in 2014 it put Sudo, formerly of major steel corporation JFE Holdings, in the position of TEPCO chairman. However, when Sudo, with the backing of the government, implemented cost-cutting measures, grumblings were heard within the company that Sudo was seeking too many results too fast and that staff evaluations were changing too dramatically. Sudo's clashes with TEPCO president Hirose, who had worked up the ranks and was initially considered pro-reform, grew increasingly serious.

There was an incident in the spring of 2016 that could be considered a prelude to current conflicts. Sudo and METI, unhappy with the fact that Hirose would not cut his ties with former management, tried to re-appoint him to the post of deputy chairman. Hirose resisted and, according to multiple sources involved with TEPCO, was able to get the support of a former TEPCO executive who had close ties with the prime minister's office. As a result, Hirose stayed in his post as company president, but his relationship with Sudo deteriorated beyond the point of repair. "It wasn't uncommon for the two to criticize each other openly at management meetings," a senior TEPCO official said.

At the end of 2016, METI announced that the amount of money necessary to deal with the nuclear crisis would be about 21.5 trillion yen, almost twice the amount of an earlier estimate. Because of the need to secure more funds, the government set up an expert panel, which then offered "recommendations" to TEPCO on how to rebuild its finances. When it was revealed that "the passing of authority down to the next generation" was one of the pieces of advice offered by the panel, industry insiders saw it as another government attempt at bringing Hirose down from his post, a source close to the case said.

Hirose is said to have resisted strongly to such renewed efforts. However, Sudo vowed that he would step down if Hirose did, forcing Hirose to bow to the pressure to resign. Some in the electric power industry have described the latest personnel reshuffle a "tie" in that both "camps" made concessions, but discontent is already spreading among career TEPCO employees. According to a senior TEPCO official, new executives, including Kobayakawa and the new president of a subsidiary company, are "all drinking buddies of outside board members who are former METI bureaucrats."

TEPCO can't afford to waste time on personnel feuds. In order to come up with the money needed to bring the troubled reactors under control, TEPCO must earn 500 billion yen per year for the next 30 years. The amount goes up further when taking into account the funds needed for capital investment. Meanwhile, TEPCO's consolidated financial results for fiscal 2016 stood at just 258.6 billion yen in operating income.

TEPCO's outline of its latest reorganization plan shows that it is aiming to raise earning power by realigning its various businesses, such as nuclear power, as well as the transmission and distribution of power, with other utilities. However, this plan is a carbon copy of the recommendations given by the government-established expert panel. Some long-time TEPCO employees have said the company only included the recommendation into its reorganization plan because the government has been on its back to do so, and that because other utilities will find no benefit to them in restructuring with TEPCO, the plan will never come to fruition. If people in the company remain this divided, TEPCO will never be able to follow through with rigorous reforms.

If TEPCO drops the ball on management reform and is unable to come up with the money it needs, it could lead to further burdens on the public in the form of higher electricity prices. TEPCO, under normal circumstances, would have gone under following the onset nuclear disaster. So if things go further south, not just the utility, but the central government, which allowed the utility to survive by pumping 1 trillion yen from national coffers into the company, will be held accountable.

Kawamura, who will be appointed TEPCO's new chairman at the company's general meeting of shareholders in late June, has the experience of having accomplished Hitachi's v-shaped turnaround through fundamental management reforms. While his appointment was initiated by the government, many TEPCO employees welcome Kawamura's pending appointment. The latest personnel change may be the last chance for TEPCO and the government to put its differences aside toward the goal of rebuilding the troubled power company.

Looking back at the latest personnel power struggle, a senior TEPCO official said, "I'm embarrassed when asked if any of the people involved (in the debacle) had 'our responsibility toward Fukushima' in mind." The government and TEPCO must not forget its responsibility toward the victims of the nuclear disaster. If they focused on the fact that there are people out there whose peaceful lives in their beloved hometowns were taken away from them, they could refrain from feuds over personnel appointments. (By Daisuke Oka, Business News Department)

 

 

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