As part of the restructuring the organization in the backdrop of $1.3billion accounting scandal, Toshiba Corp has decided to offload five percent stake each in its two white good manufacturing units to Chinese firm Skyworth Digital Holdings. As part of the agreement, Toshiba will wind up its two China sales units. Toshiba will also use Skyworth's local distribution network for selling white goods such as refrigerators, washing machines, and vacuum cleaners. Japanese laptops-to-nuclear power giant Toshiba is considering a massive overhaul of company's operations.
An extraordinary general meeting (EGM) has been convened on 30 September to discuss structural reforms at Toshiba Corp. The fraudulent accounting practices resulted in inflated impressions about the company's performance all these years. Outside directors are expected to lead the overhaul process at Toshiba. Major decisions are likely to be announced by the end of October or early November as April-September results are scheduled to be announced.
Following the stake buying news, Skyworth shares jumped up on Friday trading. The stock was trading high over seven percent during the intraday trading. Contrary to the index going down, Skyworth stock was trading higher. Hang Seng index was down 0.7 percent. Toshiba shares were also trading lower by over two percent in the Tokyo market.
Toshiba has decided to reorganize its overseas network. The restructuring of factories engaged in manufacturing large appliances is part of its structural reforms. It's estimated that about 90 percent of Toshiba's large appliances are made in China, Indonesia, and Thailand.
Importing refrigerators, washing machines and other white goods from manufacturing units in these countries and selling them in Japanese market involves a lot of logistics operations and higher costs. Addressing these challenges, Toshiba is planning to consolidate its overseas factories.
Toshiba realized that it was lagging behind its competitors in bringing new offerings to the market. The real problem lies with the competitiveness of the products, said Masashi Muromachi, Chairman and President of the company.
Accessing Skyworth's distribution network is expected to reduce the cost of marketing for Toshiba, which hopes that the association with Skyworth is helpful in competing in the Japanese white goods market. However, the details about the stake sale in two units located in China were not made public.
Toshiba was dominating the personal computer (PC) market globally, but its market share declined over the time. Toshiba has made first mass laptop computer in the world. Low-cost products from China and Taiwan have been impacting the Toshiba's market share of late.
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