Toshiba pays price for bad Japanese habits

The logo of Toshiba Corp is seen behind cherry blossoms at the company's headquarters in Tokyo

But in an unprecedented move for a major Japanese company, Toshiba filed the report without the approval of its auditors.

Toshiba Corp, the 142-year-old conglomerate, yesterday warned it might not be able to continue as a going concern as it grapples with billions of U.S. dollars in losses from its Westinghouse Electric Corp nuclear business.

Toshiba said losses past year had left it with negative shareholders equity of 225.6 billion yen ($2.1 billion) at the end of December, jeopardizing its listing on the Tokyo Stock Exchange. The nine-month financial results - which the firm's auditors, PricewaterhouseCoopers Aarata LLC, have refused to sign off - have already been delayed twice and raise the possibility that Toshiba could be delisted from the Tokyo Stock Exchange.

Toshiba's president, Satoshi Tsunakawa, apologized for the problems facing the firm and called the auditor's decision not to approve the financial report as "truly regrettable".

Foxconn, a Taiwan manufacturer, is reportedly planning to bid up to $27bn for Toshiba's prized chip business, which it is selling to cover losses. Since the nuclear unit came under the supervision of a US court, the company was deconsolidated from the Toshiba group's accounts.

A senior official at a key lender said the lack of an audit opinion would not directly affect Toshiba's risk rating. That review could result in delisting, although the exchange would likely give careful thought to delisting a company of Toshiba's size.

Toshiba declined to comment on its chips business.


Furthermore Toshiba is looking to sell a part of their chip-manufacturing unit, which is basically their crown jewellery.

Within its energy systems and solutions division, the segment as a whole saw "an huge deterioration in operating income" as a result of Nuclear Power Systems "impairment loss of goodwill".

Few companies have embodied Japan's industrial might like Toshiba, whose products run the gamut from hair dryers to giant gas-fired electricity turbines, as well as nuclear reactors.

Toshiba fell into a capital deficit at the end of March this year due to the massive impairment loss incurred by its US nuclear unit, and Toshiba shares now listed on the First Section of the TSE are expected to be downgraded to the Second Section as of August 1.

Toshiba reported that nearly all business segments except Nuclear Power Systems recorded improvements, but overall operating income was negative because of an impairment of goodwill in Nuclear Power Systems of £5.2bn. Tsunakawa said he hoped that won't happen.

Western Digital also said that the auction process was not in the best interests of Toshiba stakeholders and that it wanted to enter into exclusive talks with the Japanese conglomerate.

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