Japanese firm Koito Industries isn’t wasting any time in separating its non-aviation businesses from its embattled aircraft seat unit, which has created an industry mess of epic proportions (even though few folks want to talk about it on record).
The rubber stamp-loving company‘s board of directors has already passed a resolution to implement a plan under which a wholly-owned subsidiary will be established to cover transportation equipment-related businesses (excluding aircraft seats), electrical equipment-related businesses and housing and environment-related businesses.
These will be “split” from Koito’s aircraft seat business though an “absorption-type de-merger”, says Koito in a press statement. A de-merger, eh? How convenient.
Shareholders will get a chance to vote on the scheme on 29 June. If they agree, the de-merger will commence on 1 August.
Notably, Koito says it is also exploring the possibility of splitting its aviation seat business in the future, allowing the company to transition into a pure holding company. However, a decision regarding whether to split the aviation seat business has not yet been taken.
So what’s the purpose of the de-merger?
After fabricating test data on some 150,000 aircraft seats in the world fleet, using its own aforementioned rubber stamp to indicate that the Japan Civil Aviation Bureau (JCAB) had okayed its seats, Koito has found itself in a financial bind, as it endeavors to rectify some of its wrongdoing and maintain a reserve for liability to airlines.
In short, the company’s business results have “rapidly deteriorated”, admits Koito, which recorded a net loss of approximately 11.2 billion yen for the fiscal year ending March 2010 and approximately 16.8 billion yen for the fiscal year ending March 2011 (each on an unconsolidated basis). The company says that its net assets have dropped to approximately 6.9 billion yen as of the end of March 2011.
Koito believes that, if the current business structure is left intact, its non-aviation businesses will suffer “significant adverse effects due to the impairment of the company’s credit standing and as a result it will be increasingly difficult for the company to continue its businesses as a going concern”.
And don’t think Koito isn’t beneath begging for sympathy. Noting that it has “played a role in the development of various social infrastructure, such as railroads, electrical systems, and other transportation systems”, Koito says it “will be unable to continue to fulfill its responsibilities in making such social contributions” if its businesses go belly up.
Hmmmm, if Koito splits up the business, and insulates its other non-seat units, what will that mean for airlines seeking damages for adhering to proposed airworthiness directives, and suffering aircraft delays? Will they knock on the JCAB’s door, I wonder.