TOSHIBA is reorganising its four in-house companies into wholly-owned subsidiaries, following financial woes at its US nuclear reactor business Westinghouse.
The company says it is seeking to maximise the value of its core businesses. The move follows Westinghouse filing for Chapter 11 bankruptcy protection in the US last month.
The collapse of Westinghouse, which built the world’s first commercial nuclear reactor in 1957, was blamed on cost overruns at two nuclear plants the company was building. The plants in Georgia and South Carolina, US, were billions of dollars over budget and about three years behind schedule.
Toshiba, which bought Westinghouse in 2006 for US$5.4bn, has previously warned of “substantial doubt” about its ability to continue as a going concern. Toshiba reported a loss of ¥532bn (US$4.8bn) for the first nine months of its 2016 financial year, up from a ¥479.4bn loss over the same period in 2015.
Now, in an apparent move to protect core divisions, the Japanese conglomerate will split off four in-house companies into independent entities. This will occur in two stages: first, from 1 July, Toshiba's infrastructure systems, storage and devices, and industrial information and communication technology units will stand as distinct business units. Then, from 1 October, its energy systems and nuclear energy systems will be merged to create a new joint entity.
The technology giant said: “After the company splits, Toshiba Group will further enhance collaboration between the split-off companies, and, at the same time, aim to maximise the value of each business.
“In addition, it will establish an optimised structure for ensuring business continuity in respect of maintaining special construction business licences required to do business in Japan.”
The renewal of construction licences would allow Toshiba to continue doing business on home turf, and could be very important for stability. It is currently pushing several big construction projects that hinge on capital and shareholder equity requirements, such as a US$177m solar plant in Fukushima prefecture being built with Sumitomo Corporation.
It is expected that around 20,000 workers will be affected by the measures.