Cutting off Westinghouse

A long-time developer of nuclear energy in United States, Westinghouse Electric Company, filed for bankruptcy protection to New York Southern Bankruptcy Court on Wednesday. Its owner, Toshiba Corporation, is going to cover the provision for loss on guarantee, which will amount to ¥1 trillion. One of the greatest manufacturers in Japan takes final attempt to survive this crisis.

Toshiba obtained Westinghouse in 2006, when the world was in nuclear energy renaissance with great demand of energy in the argument over global warming. While Toshiba hoped to be one of the world biggest conglomerates in nuclear energy business, Westinghouse failed in procuring financial resource for building four nuclear power plants in U.S. Toshiba decided to retreat from nuclear energy business in foreign country by releasing Westinghouse.

To avoid further negative impact on the balance, Toshiba cuts Westinghouse off from main body. The deficit in the term ending this March will swell up from ¥390 billion to ¥1.01 trillion, marking new record in Japanese manufacturing exceeding Hitachi’s ¥787 billion in March 2009. “We hope to firmly shut the risk out as our first step to healthy management,” told Chief Executive Officer, Satoshi Tsunakawa, in his press conference.

Searching for necessary financial resource, Toshiba is selling its business on semi-conductor, which has been the main earner. It is supposed that some international companies filed for the bid by Wednesday. They possibly include Western Digital in U.S., some funds including Silver Lake Partners, or Hon Hai Precision Industry from Taiwan. Japanese government is concerning transfer of important technology to China or other Asian countries, hoping to maintain the partnership between Japan and U.S.

Westinghouse has been a top runner in development of electric technology, paralleled with General Electric. While it established the first commercial nuclear power plant in Shippingport, PA, in 1957, its nuclear business declined after severe accident in Three Mile Island in 1979. Toshiba was one of the two giants in home appliance, competing with Matsushita Electric Industrial Co. Ltd, or Panasonic. But, the ambition for international developer in nuclear power business precipitated the company into a crisis of bankruptcy.

Toshiba already sold its business on medical equipment to Canon. The managers hope to enhance its business through manufacturing of social infrastructure including elevator or railway. But, those businesses will not be the main earner, being limited to domestic contracts. Its survival is yet taken for granted.