EUPHORIA has recently broken out over a supposed new dawn of better corporate governance and higher profits for Japanese industry. But bad news this week from Sharp, a firm once a symbol of the country’s economic clout, and Toshiba, another engineering giant, were reminders of how incomplete the transformation is.
On May 14th Sharp announced its second restructuring and bail-out plan in three years. The chronically indebted and lossmaking firm said it would make an accounting adjustment that will almost entirely eliminate its shareholders’ capital of roughly ¥120 billion ($1 billion), wiping clean a slate of accumulated losses on its balance-sheet. The drastic move was presumably at the behest of two Japanese banks, Mizuho Financial Group and Mitsubishi UFJ Financial Group, that are keeping Sharp afloat. They will invest a further ¥200 billion into Sharp through a debt-for-equity swap. The firm will cut its global headcount of 50,000 by a tenth, including 3,500 job cuts in Japan, through voluntary retirement. However, Sharp is refusing to sell any of its struggling businesses.
Only five years ago, Sharp had strong competitive positions in television, LCD panels, solar panels and, in Japan, mobile phones. Now, aside from a smallish home-appliances division, it lacks any sustainably profitable products on which to base a turnaround, and its sales in...
from The Economist: Business http://ift.tt/1RJYsoP
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