If wisdom comes with age, Japan’s Toshibashould have a pretty high corporate IQ. Established in 1875, Toshiba is much older than other Japanese electronics majors such as Hitachi, Panasonicand Sony. Unfortunately, the company’s management have done some dumb things recently: in July it emerged that the company had been overstating profits for years. This week the company warned that the restructuring prompted by the accounting problems would lead to a record loss in the year to March. The shares, down by half this year, fell another 12 per cent on Tuesday.
Until this summer, Toshiba was just another Japanese electronics exporter — in 2014 about 60 per cent of its sales came from abroad — trying to recover past glories. This scandal raises questions about integrity not just at the company itself but further afield. Ernst & Young was fined on Tuesday by the regulator Financial Services Agency for “deeply improper” operations.
With the shaming done, the long overdue restructuring is under way. Compare Toshiba’s late start with the efforts of Panasonic and Sony which have already withdrawn from wsemiconductor and other hardware businesses. A fire sale of shareholdings worth ￥177bn (￡1bn) has been completed. Toshiba plans to cut 10,600 workers — a quarter of its workforce. That will be costly: the company will book restructuring expenses of ￥260bn and take a further ￥110bn in asset writedowns. In all, Toshiba expects to book losses of ￥550bn for the year to March 2016. All this comes before it has dealt with its moribund television and laptop businesses.