Toshiba chairman quits over $6bn nuclear loss
May have to sell even more of its chip business to cover costs
The chairman of Toshiba has resigned following the release of figures showing a projected $6.3bn loss from the company's nuclear business – a loss that may continue to grow and threaten its other businesses.
Following a rollercoaster few weeks in which the electronics and energy giant said it would sell off 20 per cent of its memory division to cover the revenue hole, Shigenori Shiga said he will leave the board but stay on as an executive.
But that may only be the start of the problems: the Japanese giant missed its quarterly earnings reporting deadline on the Tokyo Stock Exchange early on Tuesday and asked for a month's extension.
The figures released are unaudited and the company implied that the loss may grow even larger. In a statement, it acknowledged that it may now have to sell more than 20 per cent of its memory business – the company's crown jewel – to raise sufficient capital to continue operating.
The company said last week it had received offers of up to $3.6bn for the 20 per cent stake it put out. If the losses grow much bigger, it may end up having to sell its majority holding and possibly look at selling stakes in its PC business as well.
Toshiba's stock price has, unsurprisingly, dived and is half what it was at the start of the year. It fell 20 per cent on Tuesday.
Why and how
The massive losses are a result of Toshiba's US subsidiary Westinghouse. Back in 2015, the company admitted that the nuclear company had falsely inflated its earnings by $1.2bn, and blamed project managers for having hidden falling revenue and rising costs.
Last month, Toshiba warned losses would stretch to the billions, giving an initial estimate of between $4bn and $7bn, later revising it to $5-6bn. Tuesday's $6.3bn figure, complete with a statement that implied the true figure may be even larger, has shocked investors and put the company into emergency mode.
Asked to explain the request to delay the earnings release, the company said its lawyers were looking into the acquisition of construction company CB&I Stone & Webster by Westinghouse, which is at the heart of the problems.
Toshiba said its auditors had looked into the 2015 deal and determined that Westinghouse had massively overpaid and not accounted for its liabilities. Westinghouse thought that by purchasing the construction company it would be able to achieve big cost savings.
Toshiba's lawyers are now looking at whether "inappropriate pressure" had been exerted by senior Westinghouse managers on people below them who were responsible for reviewing the deal.
The main cause of the massive losses is two nuclear power stations being built in the US – one in South Carolina and another in Georgia. They are more than three years behind schedule and billions of dollars over budget. ®