Toshiba Corporation in Japan has serious financial problems. A massive accounting scandal involving the company has been making headlines lately. Toshiba has reported that it is demanding that five executives accused of embezzlement return more than twenty six million dollars to the company. In addition, Toshiba said that it has paid over sixty two million dollars in fines to Japanese government regulators for accounting irregularities. These irregularities include overstating Toshiba's profits by more than two billion dollars in the last seven years of operation.
Toshiba stated this week that it was going to fire the ShinNihon accounting firm. ShinNihon had done accounting for Toshiba for over sixty years. However, they did not identify the financial activities that led to the accounting scandal. Toshiba said that it was going to retain PricewaterhouseCoopers for auditing to replace ShinNihon. Toshiba hopes that this move along with other planned actions will help to restore investor confidence in the company.
The Fukushima nuclear disaster in March of 2011 that resulted in the shutdown of all Japanese nuclear reactors seriously impacted Toshiba. Toshiba had been supplying maintenance services for the boiling water reactors in Japan. With the reactors shut down, there was a major loss of revenue for Toshiba.
Toshiba is attempting to reorganize its business and is considering selling off some of its divisions to raise capital. The section of the company that makes hard disk drives for computers in one of the divisions that might be sold. The rising dominance of mobile devices and the decline of traditional personal computers is a good reason for Toshiba to sell this division. Toshiba would retain control of the division that makes flash memories which can be used in popular mobile devices. Toshiba is also considering the sale of Toshiba Medical Systems. The sale of this division would bring four billion dollars to Toshiba in return for eighty percent of its share of TMS.
Toshiba owns Westinghouse, the U.S. firm that supplies nuclear power reactors. Their pressurized water reactors are popular in foreign markets and were very profitable for Toshiba. Following the Fukushima disaster, there was a decline in orders for new reactors. The Japanese Times reported that that Westinghouse wrote down assets by over one billion dollars for fiscal years 2012 and 2013. This also had a serious financial impact on Toshiba. Toshiba has announced that it is considering selling the Westinghouse division. With sixty six nuclear reactors being constructed worldwide and many more in the planning stages, Toshiba should be able to find a buyer for Westinghouse.
Recently I posted about the global supply chain that is supporting the rise in reactor construction. Japan supplies a lot of nuclear components to foreign nuclear projects and Prime Minister Abe intends to expand nuclear exports as a major part of his economic program. It is worrisome to note that over half of the nuclear components being shipped out of Japan are not being inspected by the Japanese government. Seeing massive illegal activities in a giant of the Japanese nuclear industry like Toshiba does not instill confidence that Japanese nuclear components will always meet the rigorous technical specification necessary for nuclear safety.
