Arthur J. Villasanta – Fourth Estate Contributor
Tokyo, Japan (4E) – Shares of embattled Toshiba Corporation surged today after the company announced a series of severe austerity measures designed to shore-up investor confidence.
The restructuring sent Toshiba’s shares rocketing 12.7 percent to close near two-year highs after the announcement.
The diversified Japanese conglomerate that once owned Westinghouse said it will pare its assets; fire more than 7,000 employees (5% of its workforce) over the next five years, and buy back 40% of outstanding shares starting tomorrow. Toshiba promised a share buyback of $6.2 billion earlier this year.
It will also liquidate NuGen, its British nuclear power unit, and sell its U.S. liquefied natural gas business to China’s ENN Group.
These massive moves are part of Toshiba’s new five-year business strategy meant to make amends for the embarrassing 2015 accounting scandal that revealed widespread and years-long irregularities at the conglomerate.
The scandal forced Toshiba to recognize huge cost overruns at now-bankrupt Westinghouse. It also forced Toshiba to sell its money-making -memory chip unit earlier this year to a consortium led by U.S. private equity firm Bain Capital. These drastic moves left Toshiba with only few growth businesses.
Toshiba has been trying to get rid of its troubled assets that would have exposed it to future losses. It said its exit from its troubled businesses, along with the job cuts and other restructuring moves, will help it bolster its profitability in the long-run.
It forecast an operating profit of $6.1 billion yen in fiscal 2021 compared to $528 million in the current year.
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