Report on July Meeting Kazuo Miura
Toshiba Case July 13, 2017
This time, we picked up “Toshiba Case”, titled as “Toshiba selects three-way tie-up for chip sale, appearing to prioritize government concerns”.
The Editorial Explains
1) Who are going to buy flash memory business from Toshiba? Why does Toshiba select said consortium?
2) Why does Toshiba refuse to sell the business to Hon Hai Precision Industry? If they select the said consortium, what are the obstacles to complete the sales agreement on sale of flash memory business?
3) If Toshiba strongly try to reach the agreement, what does Western Digital take measures to block the sale of the business?
4) Will Western Digital agree with it in the end or not? And what will happen to Toshiba in the next breath?
Relation with the Government
After each member answered the above questions, all of us discussed the government’s actions for Toshiba. Getting heated was attitude of the government. The government is paying attention to Toshiba not to go into bankruptcy because “Fukushima’s Case” can’t be settled unless Toshiba can support Tokyo Electric Power. The government’s attitude is seemingly not yet clear or firm.
Reasons for Fatal Decline of Toshiba
We discussed why Toshiba dramatically declined to the most critical stage if viewed from five management factors, namely, Strategies including M&A and technological R&D, Business Organizational Structure, Management Control System including management of subsidiary corporations, Leadership and Management Power, Corporate Philosophy and Culture. We could not have enough time to conclude but we thought as follows. The top management concealed WH’s real fact of large-scale deficit including that due to Noren (goodwill) Impairment write-off, and continued to do so till 2015, thus the deficit was further deteriorated to a fatal level due to questions of the organization and lack of management skill to control a major subsidiary of WH. Even the third party restructuring commission (2015~) did not survey or excluded to research the subsidiaries under maneuvering of the top management. At the same time, their oppressive pressure under the name of “challenge” to achieve the corporate goal was extraordinary level and destroyed its management control system as well as the corporate philosophy where it says accounting be always true and correct in the code of conduct in finance operations. These negative factors invited accounting fraud. All divisions of Toshiba did the above, and further accelerated to conceal real fact of their deficits.
What we learned through discussions in the session:
One of the members suggested that “flash memory is expected to have more opportunities than disk memory in non-volatile memory market if its cost-performance level is further improved”.
We could understand the reason why Hon Hai offered three trillion yen for sale by bidding of Toshiba’s flash memory division.
Through the discussions we came to our own conclusion, if timing is allowed, that Western Digital may be the best buyer. Because they are the partner of Toshiba, their major market is the same as Toshiba’s in terms of memory element, their business scale and profitability enable to purchase this business, and by doing this, Toshiba’s flash memory technologies can be protected from China and Korea. The ongoing court fights will make clear what the real problems are and may promote to conclude the answer instead of blocking the sale. Furthermore, if it is brought to Trump’s Management, he will definitely support this trade since it is to increase employees in US and protect US from any threats of China in trade and technological fights. This will then resolve the critical timing, the most important point for present Toshiba.
Hitachi had same difficulty at 2008 Lehman Shock and had same business of nuclear power generators and relative construction but they succeeded to recover their business profit level dramatically by restructuring whole business lines. The leader of Hitachi Takashi Kawamura (2009~2010) was far more different than Toshiba’s in terms of competence, character and at the level of sense of responsibility as “the last man for the company”.