Business / Corporate

In new five-year plan, Toshiba to cut thousands of jobs, withdraw from British nuclear plant and U.S. LNG businesses

Kyodo

Toshiba Corp. on Thursday announced its five-year business reform plan to revamp its operations, with thousands of global job cuts, a withdrawal from its nuclear plant construction business in Britain and a sell-off of a U.S. liquefied natural gas operation on the agenda.

The technology conglomerate plans to cut about 7,000 jobs globally over the next five years, Toshiba Chairman and CEO Nobuaki Kurumatani said at a news conference in Tokyo.

The planned restructuring comes as Toshiba reported financial results for the April-September period earlier in the day. It posted ¥1.08 trillion ($9.5 billion) in net profit, a sharp turnaround from a loss of just under ¥49.8 billion a year earlier, as it completed the sale of its chip subsidiary.

But even with the ¥1 trillion net profit in the latest term, Toshiba needs a fundamental rethink regarding its organizational structure and its business operations in order to stay afloat, according to industry analysts.

Its group operating profit tumbled 80.7 percent to ¥6.98 trillion on sales of ¥1.78 trillion, down 5.1 percent.

For the current fiscal year ending March 31, Toshiba cut its profit estimate, citing various restructuring-related costs including a ¥93 billion loss expected from selling its U.S. natural gas business, projecting a net profit of ¥920 billion against the previously estimated ¥1.07 trillion.

Toshiba said most of the planned workforce cutbacks will come through “natural attrition,” given the fact that the company’s employees are largely age 50 and above.

Toshiba said it plans an early retirement program for 1,060 employees, and some of its group companies are separately considering cutting a total of up to 400 employees.

The company has been revamping its operations following an accounting fraud scandal that came to light in 2015 and the bankruptcy of its U.S. nuclear power plant subsidiary Westinghouse Electric Co. in 2017.

It sold its white goods business in 2016 and its personal computer, television and chip businesses earlier this year.

As of late June, the number of Toshiba group employees worldwide stood at about 132,000 after a round of business restructuring. The company expects about 1,000 employees to retire per year.

Toshiba had planned to downsize its coal-fired power generation business due to the spread of renewables such as solar and wind power, but decided not to conduct a drastic personnel cut for the sector as it expects a certain demand for maintenance work, the sources said.

Toshiba said it will liquidate its British nuclear arm, NuGeneration Ltd., after failing to sell the unit, which had planned to build three nuclear reactors in Britain.

As for its U.S. LNG business, Toshiba America LNG Corp., the company said it will sell all of its stake in the unit, without disclosing the name of the buyer.

The sell-off is projected to be completed by March.

Although the company is trying to shed its loss-making businesses, it continues to struggle to find a new growth driver following the sale of its crown-jewel chip unit.

There were some positive elements in Thursday’s news conference, where Kurumatani unveiled plans for future growth. It will invest a total of ¥1.7 trillion in such areas as renewable energy and information technology to develop innovative and competitive technologies no other firms can compete with, the Toshiba chief said.

The pressure to slim down its business further has recently prompted Toshiba to consider a pullout from sponsoring its famed rugby team, although the company officially denied the idea last week.

“There have been reports that we are considering pulling out from the rugby team activities, but in fact we are not,” Toshiba said in a statement released on its website on Nov. 2.

Earlier reports said that Toshiba was considering selling the Brave Lupus, the five-time Top League champions featuring Japan captain Michael Leitch, after the 2019 Rugby World Cup in Japan.

Citing internal sources, the reports said that Kurumatani has been aiming to build a lean cost structure since assuming the top position in April, and wants Toshiba’s sports sponsorship to be reviewed despite the previous management’s decision last year to retain the company’s rugby and baseball teams.