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Tepco execs receive letter of protest (AP/Kyodo News)

Timid Tepco

Japan | Critics blame Tokyo utility's 'intellectual arrogance' and slow response that compounded a catastrophic natural disaster

The longer the nuclear reactor disaster in Japan oozes into the local environs of Fukushima and into the news media, the more that the damaged reactors seem a tragic parable for their owner, Tokyo Electric Power Co.

Tepco, as it's known, owns the Fukushima Daiichi Nuclear Power Station and other plants that provide roughly 30 percent of Japan's electricity. It's taking broadsides from government officials in Japan, from environmentalists, and from news media that are churning out reports about a culture of complacency and ineptness at Tepco. The organization appeared to be-like its 40-year-old plants-unprepared for the earthquake or tsunamis that would rattle both its energy production and its stock price, which plunged to a 60-year low this week.

Roger Gale, a nuclear industry consultant and former official at the U.S. Department of Energy, said Tepco should have prepared for the crisis better and will likely see top brass head for the exits. Other possibilities include a Tepco bankruptcy or government takeover. It has massive cash flows and a reputation for hiring top young engineers in Japan. But Mr. Gale said it also hosts an array of management problems: a lack of transparency, problems with record keeping, outsourcing too much line maintenance work, relying on manual rather than automatic controls, and being too slow on the draw when making decisions.

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"They have an intellectual arrogance about them. They have an internal management culture that is not the best," said Mr. Gale, who served as a consultant to Tepco over two decades. "The top brass [at Tepco] only got their hands dirty when their pens leaked."

Nuclear plants in France, Germany, and the United States are far more automated than in Japan, where more controls are based on manual decisions, switches, and reactions, says Gale. He thinks U.S. utilities would have acted more quickly in a similar disaster: "[Tepco] probably reacted more slowly in the initial case than they needed to."

Crisis management-from British Petroleum's oil spill to Toyota's brake recall-is never a favorite activity of large corporations. But Tepco appears to have demonstrated particular slowness to act at times and is serving as a lighting rod for criticism.

Japan's Prime Minister Naoto Kan reportedly asked "what the hell is going on" according to the Kyodo news agency when Tepco didn't inform him for an hour of an explosion at Fukushima 1. The New York Times and The Wall Street Journal have both reported that Tepco officials delayed flooding overheated parts of the nuclear plant with corrosive seawater although that was called for in the company's emergency protocols.

While some radiation fears may be overblown, many see a major cleansing in the works at Tepco. "It's too early to make any specific judgements," said Carl H. Seligson, a former Wall Street banker in the utility industry. But "it looks like they're a bunch of bumbling fools." He expects Tepco's problems to sideline future nuclear projects in the United States and Europe, which is already reviewing its more than 100 nuclear plants.

Tepco did not respond to a request for comment. In a note on Tepco's website last month, President Masataka Shimizu expressed condolences to people who died in the earthquake and offered "deep apologies for the concerns and inconveniences caused due to the incident" at Fukushima and "the leakage of radioactive substances to the people living in the surrounding area of the power station."

Shimizu, 66, checked into a hospital in late March for high blood pressure and made no public statements for weeks. Tepco's 71-year-old chairman Tsunehisa Katsumata took over his duties. Already, Japanese politicians are scuttling about the future of the company when the disaster is under control. Some think the government could acquire a majority stake in the company to help it deal with liabilities from the tragedy.

Tepco has grown rapidly since 1951, when it started as a utility serving Tokyo after World War II. It reported $62.5 billion in revenue and $1.67 billion in income in fiscal 2009. The recent earthquake, tsunami, and nuclear crisis have so far wiped out more than $30 billion of Tepco's market value. As the company acknowledged radioactive water flooding the basements of reactor buildings this week and contaminated water draining out to sea in past days, its share price also seeped further despair into the broader Japanese stock indexes this week.

This isn't the first time the company has weathered storms. In 2003, profits sank after a scandal in 2002 involving cover-ups of reactor defects that led to the ouster of its president and other top executives. And in July 2007 it faced the challenge of lost revenues and criticism from Japan's prime minister when the Niigataken Chuetsu-oki Earthquake led to a shutdown of its Kashiwazaki-Kariwa Nuclear Power Station for 21 months.

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