Toshiba Plans to Cut 7,800 Jobs as It Warns of Huge Loss

 

By JONATHAN SOBLEDEC. 21, 2015

TOKYO — Toshiba warned on Monday that it would incur its largest net loss ever as it tries to restructure a stable of unprofitable businesses.

The Japanese company, whose financial struggles were laid bare this year in a $1.2 billion accounting scandal, said it would eliminate 7,800 jobs, mostly in its slumping consumer electronics division. That brings the number of job cuts announced this year to more than 10,000 total, or roughly 5 percent of its work force.

Shedding workers is expensive in Japan, where the majority of employees enjoy legal protection from layoffs. Toshiba will have to negotiate voluntary buyouts instead, a process it said would contribute to a loss of 550 billion yen, or $4.5 billion, in the financial year ending in March.

 “As a manager, I feel the responsibility deeply,” said Masashi Muromachi, who took over as president after Toshiba acknowledged in July that it had engaged in years of misleading accounting to cover up sagging profits. “My biggest task now is to ensure that we start recovering next year.”

The bookkeeping scandal has been an embarrassment for corporate Japan. Though wrongdoing by businesses is hardly unheard-of here, Toshiba was among the bluest of blue-chip companies, featuring on a prominent index of businesses believed to combine profitability with clean, modern corporate governance.

Instead, it turned out that the company had been massaging its earnings since the global financial crisis took hold in 2008. A committee of investigators hired by the company concluded in the summer that it had engaged in a “systematic cover-up.”

The committee found problems in virtually all corners of Toshiba’s business, which encompasses products as various as refrigerators and nuclear power plants. Half the company’s board of directors stepped down.

The more than 150 billion yen in profit overstatement discovered by the committee was equal to about a third of the pretax profits that Toshiba reported during the seven-year period under scrutiny.

Toshiba is seeking to offload whole divisions as well as employees. It said on Monday it would look for a buyer for its health care arm, which makes products like medical scanners for hospitals. It already wants to offload all or part of its personal computer business as well as its United States-based nuclear power plant subsidiary, Westinghouse.

The Japanese Securities and Exchange Surveillance Commission, a government financial-market watchdog, is pursuing a 7.3 billion yen fine against Toshiba, which would be the largest such penalty imposed in the country.

Like many Japanese tech giants, Toshiba has been reluctant to close or sell money-losing divisions like televisions and home appliances, which employ thousands of people but whose competitiveness has been undercut by producers in lower-cost countries.

In addition, analysts say, Toshiba never managed to digest its acquisition of Westinghouse in 2006, which cost it $5.4 billion. Its problems only deepened with the financial crisis and the nuclear meltdowns in Fukushima in 2011, which crippled the atomic power industry in Japan. Toshiba is one of the biggest suppliers of equipment to Japanese electric utilities, both for nuclear and conventional fossil-fuel generation.