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In Trouble Over Soviet Deal : Sales Fall as Toshiba Feels Sting of U.S. Consumers

July 22, 1987|BRUCE HOROVITZ and JESUS SANCHEZ | Times Staff Writers

Toshiba Corp., stung by criticism in Congress for the sale of strategic equipment to the Soviet Union, may also be starting to feel the sting of American consumers, the company confirmed Tuesday.

Sales by the U.S. subsidiary of embattled Toshiba have fallen in the last month, as much as 20% from the month before in one division, spokesmen said.

"We are feeling the effects in all four of our divisions," Nobuo Ishizaka, chairman and chief executive of New York-based Toshiba America Inc., said. Is the U.S. criticism of Toshiba's parent company directly to blame? "That is what I want to ask," Ishizaka said. "I suppose so, but I'm not sure."

This week, the company staged a public relations blitz that included full-page advertisements in about 60 newspapers apologizing for what happened, but that didn't stop criticism of Toshiba. There were more sharp remarks aimed at the company in Washington on Wednesday.

A subcommittee of the House Armed Services Committee approved a bill that would ban the sale of Toshiba products at post exchanges on U.S. military bases. About $23-million worth of Toshiba consumer electronic products were sold last year at the stores on military bases, officials said.

The subcommittee chairman, Rep. Dan Daniel (D-Va.), said that the response of Toshiba executives has been inadequate. The full-page ads added "insult to injury," he said.

And, Tuesday, the Senate passed a trade bill that includes a ban on Toshiba's doing business in the United States for up to five years.

U.S. criticism has centered on actions by Toshiba Machine Co., a subsidiary 51% owned by Toshiba. In 1984, Toshiba Machine sold to the Soviet Union and installed computer-guided milling machines for use in making near-silent submarine propellers.

Two Officers Resigned

As a result of the furor in the United States, the two top officers of Toshiba in Japan resigned.

Among the hardest hit of the Toshiba divisions is its industrial electronics business sector in Irvine. There, sales of its telephone systems and lap-top computers are off about 20% over the last month, compared to the previous month, said Dennis Eversole, vice president of finance. "Over the next year," he said, "the impact could be very significant to our business. Our perception is that it probably has not reached bottom yet."

Also, sales of Toshiba's consumer products, such as video cassette recorders and compact disc players, are down more than 12% over the last two months, compared to the two previous months, said Jay Yancy, vice president of sales for consumer products at Toshiba America. "We were on the verge of doing $1 billion in consumer electronics business this year, but now that won't be reached," he said.

Toshiba sells more than $2 billion in goods in the United States annually.

'Doesn't Seem to Phase Them'

In Southern California, however, some retailers who carry the Toshiba brand say sales have not slumped. "I thought for sure (sales) would be off," said Corrine Chacon, an electronics saleswoman at the May Co. department store in Montebello, where Toshiba sales have not dropped. "You tell customers about it," she said, "and it doesn't seem to phase them. It bothers me more than it does them."

But, at the Broadway department store in the Del Amo Fashion Center in Torrance, salesman Peter Jebo said his customers have told him that "they would not have bought Toshiba because of what has happened." But Jebo said he has little to lose--his store does not carry the brand.

Indeed, getting dealers to continue to carry the Toshiba brand may be one of Toshiba's biggest headaches. "This is the height of the planning period for the fall, and a number of our dealers' orders are on hold," Yancy said. "But, so far, at least, there have not been a rash of cancellations."

In the full-page ads nationwide on Monday and Tuesday, the company said, in an open letter, that it was sorry for its actions.

"Toshiba Corporation extends its deepest regrets to the American people," said the headline on the letter, signed by Joichi Aoi, president and chief executive of Toshiba Corp. The letter said that Toshiba Corp. "shares the shock and anger of the American people, the Administration and Congress at the recent conduct of one of our subsidiaries, Toshiba Machine Co."

Points to Resignations

The letter, which was mostly composed by Toshiba's law firm, pointed out also that both the chairman and president of Toshiba Corp. have resigned since the disclosures. "For the Japanese business world, this is the highest form of apology," the letter said.

Executives at Toshiba and its U.S. subsidiary had haggled over the contents of the letter for nearly 10 days, said David Houlihan, a partner at Toshiba's Washington-based law firm, Mudge Rose Guthrie Alexander & Ferdon.

"The hardest task was getting the people in Tokyo to sign off on things that were not even in their native tongue," Houlihan said. "And executives became extremely cautious anywhere that the letter mentioned the U.S. government."

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