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Toshiba to Execute “Toshiba Revitalization Action Plan”

21 Dec, 2015

 Toshiba Corporation (“the Company”) today announced that Toshiba Group will implement a series of management measures under a “Toshiba Revitalization Action Plan.” This plan has four strands: “Decisive Action on Business Structural Reform” “Strengthen Internal Controls and Reform the Corporate Culture;” “Review the Business Portfolio and Operational Structure;” and “Reforming the Financial Base”

In respect of “Decisive Action on Business Structural Reform,” the company has made the decisions detailed below. The Company has also defined policies in respect of “Strengthen Internal Controls and Reform the Corporate Culture,” “Review the Business Portfolio and Operational Structure” and “Reforming the Financial Base,” and the details of action plans in each area will be announced separately, as they are determined.

By implementing and resolutely executing this action plan, Toshiba hopes to regain the trust of shareholders, investors and all stakeholders, and to achieve a strong corporate constitution.

1. Decisive Action on Businesses Structural Reform

In addition in restructuring measures already announced for System LSIs and Discretes in the semiconductor business segment, the Company had decided to pursue structural reform of the PC, Visual Products, and Home Appliances businesses in the Lifestyle Products and Services business segment. The details follow.

Through these measures, the Lifestyle business segment will reduce its headcount by 6,800 employees, approximately 30 % of its global total, by March 31, 2016.

(1)Basic Policies

 PC Business
:
 Further realize low cost business operation, and consider alliances with third party companies as  
 future option.

 Visual Products Business:
  End all development, production and sales outside Japan and replacing with brand license busines
  structure in overseas market. Concentrate on the Japanese market

 Home Appliances Business:
  Further improve operational efficiencies, and consider alliance with third party companies as
 future option.

(2)Action Items

 PC Business:
 ・Concentrate on BtoB
   The PC business will concentrate on its BtoB business, where further global demand is expected,
  and build up its enterprise customer base as a means to generate healthier profit. BtoC
  operations will concentrate on the Japanese and the U.S. market where stable business can be  
    expected.
 ・Reform of business structure
  In order to transform to an operational structure that generate profits, with the downsized global  
  sales of the scale of 3 million units a year, the number of indirect employees will be reduced,
  operating sites will be optimized, and business processes will be changed to reduce fixed costs. In
  addition, the PC business will end consignment of design and manufacturing to outside vendors,
  and cease buy and sell transactions. By concentrating on in-house design and manufacturing, p
  roduct platforms will significantly be reduced to below one-third of the current number.
 ・Company Split
   The Personal & Client Solutions Company will be split off from Toshiba Corporation and merged
  with Toshiba Information Equipments Co., Ltd., a BtoB PC sales company in Japan, to improve
  operational efficiency. This Company Split is planned for April 1, 2016

 Visual Products Business:
 ・Withdrawal from operations outside Japan
  The TV business has already shifted to a brand-licensing model in North America and Europe.  
  Business in Asia (excluding China) will also shift to this model, and ownership of the Company’s
  TV manufacturing plant in Indonesia is planned to be transferred to a third party company.
  Business in the Middle East and Africa will also shift to brand-licensing model through the sale of
  part of the shareholdings in two joint venture companies in Egypt that respectively manufacture
  and sell TVs. These companies will become non-consolidated companies of Toshiba.
・Reform of business structures in Japan
  In Japan, the TV business will reduce fixed costs and strengthen profitability by enhancing   
  development efficiency and reducing the number of indirect employees. It will also downsize TV
  sales to the scale of 600 thousand units a year, and concentrating on profitable high-end models.

 Home Appliances Business:
・Reform of business structure
  The Home Appliance Business will cut fixed costs by reducing the number of indirect employees
  globally, optimizing operating sites in Japan, and improving operational efficiency.
 Withdrawal from the sales and production of twin-tub washing machines
  Manufacturing of twin-tub washing machines will end at the production facility located within the
  same site as TV manufacturing plant in Indonesia, which will be also transferred to a third party.
  As a result, Toshiba will end sales of twin-tub washing machines in Japan and other countries.

 Sale of Ome Complex
 ・In order to improve asset-use efficiency in the Lifestyle business segment, the Company plans to  
  close and sell Ome Complex in Japan.

2. Strengthen Internal Controls and Reform the Corporate Culture

(1) Development of Improvement Action Plan

 Towards ending its designation of its shares as securities on alert, Toshiba is currently
 implementing measures based on the Recurrence Prevention Plan announced on September 7. In
 this connection, the Company is strengthening supervision of top management and internal
 controls, holding awareness improvement seminars and meetings for executive managers and in
 workplaces. Progress to date in major items is detailed in (2) below. Additional measures that are
 under consideration will be announced promptly after they have been finalized.

(2) New Actions Taken to Prevent Recurrence and Reform the Corporate Culture   
 The following actions are being taken under the new management team appointed in October, as
 part of the measures to prevent recurrence of inappropriate accounting.

 Recurrence Prevention
 ・Accounting and awareness improvement seminars
 ・Training in accounting compliance
 ・Review on accounting procedures in relation to percentage-of-completion, valuation of
   inventory and recording of operating expenses
 ・Review of the budget development process 
 ・Review of corporate governance rules
 ・Reinforcement of the internal audit structure

 Reform of Corporate Culture
 ・Evaluation system for the President & CEO
 ・360 degree surveys of executive  managers
 ・Executive management seminars
 ・Employee awareness surveys
 ・CSR workplace meetings
 ・Improvements in information disclosure

 Examination of the Advisor system
  Abolition of the posts of “Advisor to the Board” and “Advisor” as positions for retired
  executives is being considered.

3. Review the Business Portfolio and Operational Structure

Within the process of developing mid-term plans, starting from FY2016, the Company will discuss the following items and finalize the plan by the end of March 2016. The Company plans to announce its management policy at the same time as it completes the next mid-term plan.

(1) Business Portfolio
 The Company had redefined its focus business areas, and concluded that it will focus on the  
  Energy and Storage businesses.
 The Healthcare business has achieved high profitability and a global presence in diagnostic
  imaging. However, securing further business growth requires the allocation of sufficient business
  resources for research & development and others. Given this, the Company has decided that, in
  order for the Healthcare business to realize its potential to the full, and to maximize its value to
  the full, the best solution is to invite outside majority shareholder(s) to make sufficient support
  for the Healthcare business. This will also, at the same time, strengthen Toshiba’s balance sheet.
  Toshiba Corporation and Toshiba Medical Systems Corporation will collaboratively give immediate
  priority to executing this plan.

(2) Establishment of a small but strong headquarters and review of the business
  operational structure
 The Company will slim down corporate staff functions, and concentrate the corporate staff’s
  mission on strategic planning for the future. In order to downsize the corporate staff, the
  Company will create a common platform for the Toshiba group, and enhance the organizational
  efficiency. At the same time, in support of the operational shift to independent autonomous
  management of the in-house companies, functions needed for business operations will be
  transferred to the in-house companies. Through these measures, the Company aims to establish
  a small but strong corporate function, and has also decided to implement a personnel
  rationalization program, including an early retirement incentive program targeting corporate staff
  members. With this program, and by reviewing activity expenses, the corporate headcount will
  decrease by about 1,000 and operating costs will be cut by approximately 20 billion yen by March  
  2016.
 The company will focus on cash flow in planning mid-term business plans, budgets, business
  performance management and business performance evaluation, and also strengthen
  management of interest-bearing liabilities by the in-house companies.

4.  Reforming the Financial Base 

Reflecting on the fact that it fell into an overriding concern for current profit, the Company will continue to promote business management emphasizing cash flow, and give first priority to restructuring for recovery from a weakened financial platform.

(1) Measures to secure financial platform
 The Company will set firm rules on limits to investments and make resource allocations based on
  the redefined business portfolio and in those business domains that will generate cash. Under this
  policy, the Company will focus its FY2016 investments on the Energy and Storage businesses,
  and limit investments in other areas to refurbishment.
  The Company will also reinforce management of interest-bearing debt on a consolidated basis by
  the in-house companies so that the Company will be able to reduce interest-bearing debt.

(2) Sales of assets
 The Company will also thoroughly review the assets it holds, such as stocks and real estate, and
  their necessity, and consider selling them off, without any restrictions
 

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Information in the press releases, including product prices and specifications, content of services and contact information, is current on the date of the press announcement, but is subject to change without prior notice.

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