Toshiba’s Meltdown: Chairman Out, $6.3 Billion Write-Down
Company postpones issuing earnings results as it warns of large write-down on its nuclear business
TOKYO— Toshiba Corp.’s problems threatened to spiral out of control as the electronics giant projected a $6.3 billion write-down, postponed its earnings report because of allegations of impropriety and said its chairman was resigning—all in the space of a day.
The delay in the earnings report sent Toshiba shares down 8% in Tokyo trading Tuesday, and its president said he was willing to sell most or all of Toshiba’s profitable flash-memory business to help the company survive past the end of its fiscal year March 31.
The latest troubles stem from Toshiba’s U.S. nuclear plant business, Westinghouse Electric Co., which is battling cost overruns at reactor projects in Georgia and South Carolina.
The losses have gotten so big that they could topple a company whose roots go back to 1875, the dawn of Japan’s modern era. Known for its pioneering innovations in notebook computers and the flash memory chips that are ubiquitous in today’s devices, Toshiba has struggled in recent years with the decline of its consumer business.
A 2015 accounting scandal, in which the company acknowledged fudging numbers to make its personal computer business and other units look better, led to the resignations of top officials.
One of those who assumed a top role in the wake of the scandal was Chairman Shigenori Shiga, a longtime executive in Toshiba’s nuclear business. The company said Tuesday that Mr. Shiga would resign as chairman, effective Wednesday, and former Westinghouse Chief Executive Danny Roderick was stripped of his executive post at Toshiba headquarters.
“I apologize deeply for all the inconvenience we have caused our stakeholders,” Toshiba Chief Executive Satoshi Tsunakawa said at a news conference.
Toshiba’s willingness to sell a majority of its main remaining crown jewel, the memory-chip business that supplies smartphone makers such as Apple Inc., marked a drastic shift from its stance weeks ago when it said it would limit any buyer’s stake to 19.9%.
“The best possible option is to sell everything because it would be meaningless for Toshiba to keep a minority stake in the memory business,” said Ace Research Institute analyst Hideki Yasuda.
The company said its shareholder equity fell into negative territory as of Dec. 31, leaving just a month and a half to find ways to get back above zero before the March 31 fiscal year-end.
Toshiba had been scheduled to announce its April-December results at noon local time Tuesday, the final day for companies to release quarterly results under listing rules. But after that hour came and went with no release, Toshiba said it was asking for a one-month delay.
It said an internal whistleblower had raised suspicions that management at Westinghouse Electric had exerted inappropriate pressure over the unit’s accounting. It said a law firm hired by Toshiba had interviewed those involved in the issue and found inconsistencies in their stories.
Toshiba said it couldn’t release official results while the investigation continued. It didn’t give details about the alleged pressure.
Later Tuesday, Toshiba released a presentation containing many of the numbers that would normally go in an official results release including the ¥712.5 billion ($6.3 billion) write-down on the nuclear business.
Toshiba paid $5.4 billion for Westinghouse in 2006, anticipating a nuclear-power renaissance that never came. Stricter safety standards after the 2011 Fukushima nuclear accident in Japan added to the cost of plants in China and the U.S.
“Our acquisition of Westinghouse back then might not have been the right decision, if you consider the numbers today,” said Mr. Tsunakawa, the chief executive.
The company confirmed reports that it would stop building nuclear power plants and focus on selling reactor designs as well as nuclear services. Mr. Tsunakawa said Toshiba was willing to sell a majority stake in Westinghouse, but analysts said they doubted anyone would want to buy it.
Westinghouse is building reactors in Georgia and South Carolina commissioned by utilities Southern Co. and Scana Corp., respectively.
To end litigation over cost overruns, Westinghouse in 2015 made a deal to acquire Stone & Webster, its construction partner on the U.S. nuclear projects. Westinghouse and its parent became the only guarantor on the projects, meaning that if the reactors couldn’t be completed in a timely manner, Toshiba would shoulder the costs.
Toshiba provided some details Tuesday on the cost overruns, saying labor costs were expected to run $3.7 billion more than earlier calculations, while contractors and materials were responsible for $1.8 billion in cost overruns.
Toshiba said it based its latest cost calculations on the most pessimistic scenario, but executives also said they couldn’t rule out further losses. They said four nuclear plant projects in China were also behind schedule.
Investors said the turmoil left them uncertain whether Toshiba had a viable survival plan. “They are losing trust,” said Ichiro Yamada, general manager of the equities department at Fukoku Mutual Life Insurance Co.
Masayuki Kubota, chief strategist at Rakuten Securities, said that if the company continued to unload its most profitable businesses while keeping problem units, “it is impossible to have hope about Toshiba’s future.”