Toshiba’s Westinghouse unit seeks bank­ruptcy pro­tec­tion

Austin American-Statesman - - MONEY & MARKETS -

Ja­pan’s em­bat­tled Toshiba Corp. said Wed­nes­day that its U.S. nu­clear unit Westinghouse Elec­tric Co. has filed for bank­ruptcy pro­tec­tion, mark­ing a key step in its strug­gles to stop the flow of mas­sive red ink.

Toshiba said in a state­ment that it filed the Chap­ter 11 pe­ti­tion in the U.S. Bank­ruptcy Court of New York. The move had been largely ex­pected.

Toshiba has said it’s ex­pect­ing a loss of $4.3 bil­lion for April-De­cem­ber of last year, in­clud­ing a $6.2 bil­lion hit from its em­bat­tled nu­clear busi­ness. It said Wed­nes­day that it was work­ing out re­vised num­bers, and warned that the loss for the fis­cal year may grow to $9 bil­lion.

Toshiba ac­quired Westinghouse in 2006 with much fan­fare, mak­ing nu­clear power an im­por­tant part of its busi­ness strat­egy.

Af­ter the March 2011 nu­clear dis­as­ter in Fukushima, costs of the busi­ness have bal­looned be­cause of grow­ing safety con­cerns and reg­u­la­tions, and a sour­ing of sen­ti­ment to­ward nu­clear power in some coun­tries, such as Ger­many.

Toshiba has been eager to get Westinghouse off its books to im­prove its plight, and it said it would do just that from this fis­cal year. It has said ear­lier it wants to sell Westinghouse. Toshiba said Westinghouse had racked up debt of $9.8 bil­lion.

Toshiba President Satoshi Tsunakawa said the move was aimed at “shut­ting out risks from the over­seas nu­clear busi­ness.”

“We want to make this our first step to­ward re­cov­er­ing our solid busi­ness,” he told re­porters af­ter the an­nounce­ment.

Toshiba re­it­er­ated its view that at the root of the prob­lem was the ac­qui­si­tion of U.S. nu­clear con­struc­tion com­pany CB&I Stone and Web­ster. It de­clined com­ment on pos­si­ble fu­ture part­ners in the re­ha­bil­i­ta­tion of Westinghouse.

Toshiba, which has been un­able to re­port its fi­nan­cial re­sults as re­quired, post­pon­ing it into next month, said it would mon­i­tor the re­ha­bil­i­ta­tion pro­ceed­ings and dis­close in­for­ma­tion as quickly as pos­si­ble.

Its chair­man has re­signed to take re­spon­si­bil­ity for the com­pany’s trou­bles.

Au­di­tors ques­tioned Toshiba’s lat­est re­port­ing on the ac­qui­si­tion of CB&I Stone & Web­ster af­ter a whistle­blower, an em­ployee at Westinghouse, wrote a let­ter to the Westinghouse president.

The com­pany’s rep­u­ta­tion has also been tar­nished in re­cent years by a scan­dal over the doc­tor­ing of ac­count­ing books to meet un­re­al­is­tic profit tar­gets.

Satoshi Oga­sawara, who has writ­ten a book about Toshiba’s sys­tem­at­i­cally fal­si­fy­ing fi­nan­cial re­sults, says ex­ec­u­tives knew of the prob­lems for years but kept pro­cras­ti­nat­ing, hop­ing against hope that things would get bet­ter and they would be able to avoid blame. But things just got worse.

“Buy­ing Westinghouse was the be­gin­ning of the end,” he said. “But even be­fore that, there was a du­bi­ous cor­po­rate cul­ture.”

Toshiba al­ready faced prob­lems in its per­sonal com­puter busi­ness amid com­pe­ti­tion from Dell, Len­ovo and HP. The drop of oil prices com­bined with the Three Mile Is­land and Fukushima ac­ci­dents made nu­clear power less lu­cra­tive, and plant con­struc­tion kept get­ting stonewalled, said Oga­sawara. He be­lieves many ex­ec­u­tives re­spon­si­ble for the mess are still at Toshiba, with­out be­ing held re­spon­si­ble.

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