TOKYO -- Toshiba announced on Monday that it will split up its four main businesses into separate wholly owned subsidiaries. The spinoffs will begin in July and 19,000 employees will be transferred to the new companies.
The Japanese conglomerate is scrambling to prevent its nuclear woes in the U.S. from choking its entire operations. The segments to be spun off are social infrastructure, which handles projects such as water treatment and railways; energy, which includes thermal and nuclear power generation; electronic devices, which covers data storage and hard-disk drives; and information and communication technology. These are the four pillars of Toshiba in its current form.
The aim is to increase the self-sufficiency of each business. The individual units will enjoy more flexibility and freedom to pursue new opportunities, and the managerial responsibilities will be clearer. "The separate companies will be directly accountable to the market and clients," Toshiba said in a statement.
The immediate reason for the breakup lies in the upcoming expiration of certain construction licenses. As a provider of machinery related to power generation and infrastructure construction, Toshiba is required to renew its licenses every five years. The licenses are only issued to fiscally healthy companies, and the huge losses incurred by U.S. nuclear arm Westinghouse Electric were likely to disqualify Toshiba from the privileges.
The company had to act before the licenses expire in December.
The infrastructure, electronic devices and ICT operations will be spun off in July, with energy to follow in October. Employee salaries will be maintained at current levels for the time being. However, future pay could fluctuate according to the performance of each company.
Some employees have expressed dismay at the "dismantling" of a once-powerful symbol of Japan Inc. Toshiba may find it hard to retain its best talent as it embarks on the tough road ahead.