In the annals of Japan’s technological prowess, Toshiba once stood as a shining example of innovation, producing a plethora of electronic goods from TVs to computers. However, this emblematic company has now bid farewell to the Tokyo stock exchange, concluding a storied 74-year history. The question that lingers is how did this stalwart of Japan Inc., with its rich industrial legacy, plummet so spectacularly?
The first cracks in Toshiba’s facade appeared in 2015, unraveling a web of accounting malpractices that spanned multiple divisions, implicating top management. Over seven years, the revelation emerged that Toshiba had overstated its profits by a staggering $1.59 billion (£1.25 billion). The fallout continued in 2020, with the discovery of further accounting irregularities and allegations surrounding corporate governance, casting a shadow on shareholder decision-making processes.
The nadir was reached in 2021 when an investigation unveiled collusion between Toshiba and Japan’s trade ministry. The ministry, viewing Toshiba as a strategic asset, had allegedly conspired to suppress the interests of foreign investors. This revelation not only stained Toshiba’s reputation but also cast a pall over foreign investors’ confidence in Japanese stocks, transforming the issue from a corporate scandal into a broader concern for Japan’s entire stock market.
As if beset by a perfect storm, Toshiba faced another crisis in 2016 when it assumed responsibility for several billion dollars linked to the construction of a nuclear power plant acquired by its US unit, Westinghouse Electric, just a year earlier. The subsequent bankruptcy of Westinghouse left Toshiba grappling with a collapse in its nuclear business and liabilities exceeding $6 billion. To weather the storm, Toshiba jettisoned various businesses, including mobile phones, medical systems, and white goods.
In a desperate bid for survival, Toshiba sought a lifeline in 2017, securing a $5.4 billion cash injection from overseas investors. While this forestalled a forced delisting, it also ushered in activist shareholders who exerted greater influence over the company’s trajectory. Turf wars ensued, paralyzing Toshiba, a titan in batteries, chips, and nuclear and defense equipment.
Amid protracted battles over potential corporate restructuring, Toshiba formed a committee in pursuit of privatization. By June 2022, eight buyout proposals were on the table. Earlier this year, the denouement arrived as a consortium of Japanese investors, led by the state-backed Japan Investment Corp (JIC), sealed a $14 billion takeover. The specifics of the new owners’ turnaround strategy remain unclear, but outgoing leadership has hinted at a focus on high-margin digital services.
The Japan Investment Corp, with a history of extracting value from major manufacturers like Sony and Olympus, faces a formidable challenge with Toshiba. Unlike previous endeavors, Toshiba’s vast scale and national security implications loom large. With approximately 106,000 employees and critical operations, the path forward for Toshiba under new ownership is both intricate and pivotal.