Toshiba’s Westinghouse files for bankruptcy on Wednesday. The US nuclear unit asked for protection from the creditors. This happened only three months after the report of huge cost overruns. The Japanese parent office sought protection to survive the company’s future. The Pittsburgh-based Westinghouse unit is under construction. However, the bankruptcy will allow the company to renegotiate or break the construction contract.

With the file for bankruptcy, both parties (Toshiba and the project owner) may report losses. The latter may ask for a sale of the business to pay the damage. However, Toshiba took the decision to protect itself from further liabilities and to maintain the company’s overall future. As reported by a company representative, total liabilities related to the Westinghouse project totaled $9.8 billions in December 2016. Those liabilities make it one of the company’s largest losses ever.

The company reported that the bankruptcy would add to the net loss record of the company up to March 2017. The losses would total $1 trillion yen ($9 billion) after it made a total loss of $390 billion last year. It was the company’s largest annual loss. Actually, the Westinghouse bankruptcy is the sequel of the losses the company has faced since the 2015 accounting scandal. Its nuclear problems have led to declining shares.

Potentials Effects of Westinghouse Bankruptcy

To cover the losses, the company had decided to hike the memory chip prices. However, it did not seem to be enough. Toshiba admitted the Chapter 11 filing would lead serious negotiations between the company, the units, and the creditors. Chances are that the negotiations would affect the US and the Japanese governments. This is reasonable since the company has a huge business and the collapse will significantly influence both parties.

However, the Japanese parent is also worried that the bankruptcy filing would lead to criticism from the US President, Donald Trump. The US President had promised to provide the local labor force with more jobs and finances. The bankruptcy will affect the costs paid by the taxpayers in the US for the two nuclear projects in South Caroline and Georgia. Meanwhile, the US government had granted a loan of $8.3 billion for the utilities in Georgia. The spokesman of the Japan’s government expected that there would be a discussion between both parties.

To protect the core businesses during the re-organization period, the Westinghouse unit said that it had secured $800 million in financing. On the other side, Toshiba said that it would secure up to $200 million of the financing. However, the unit representative said that the Westinghouse’s bankruptcy would not affect its operation in Europe, the Middle East, Asia, and Africa.

Toshiba acquired the Westinghouse unit 10 years ago for $5.4 billion. It has run nuclear projects in different levels in some countries, such as India, China, and the United Kingdom because of oil and gas price hikes. The company was convinced that the government would take efforts to cap carbon emissions as a way to prevent global warming. However, the problem appeared since the US government failed to adopt the legislation for curbing the carbon emission.