TOKYO — Shares in Sharp fell 13 percent Friday after the abrupt departure of Foxconn Technology Group’s chairman from Japan fueled uncertainty about a deal between the two organizations.  After the market close, Standard & Poor’s downgraded the company’s debt rating to below investment grade, underscoring growing concerns about the ability of the money-losing company to pay its debts and revive its business.  In addition to liquid-crystal display television screens, Sharp makes screens for Apple iPads and iPhones, devices that Foxconn assembles. But it has been hammered mostly by aggressive competition and sluggish demand for televisions, and is scrambling for money to refinance billions of dollars of debts maturing in the near term.  “Sharp’s liquidity position is weakening, in Standard & Poor’s view,” the agency said in a statement Friday. “Internal cash flow remains weak, and financial market conditions for the company have deteriorated”  “Our current ratings incorporate an assumption that Sharp will reach an agreement” with Foxconn, which has offered to buy a 9.9 percent stake in Sharp, S.&P. said. The agency added that it was keeping the reduced BB+ debt rating on negative watch for a possible further downgrade.  On Thursday, Terry Gou, Foxconn’s Taiwan-based chairman, was visiting the liquid crystal display, or LCD, plant in western Japan that his company owns jointly with Sharp . He skipped a planned news media briefing at the factory and returned to Taiwan. The unexpected departure ended expectations that an agreement would emerge Friday for Hon Hai Precision Industry, Foxconn’s flagship subsidiary, to buy the stake in Sharp.  “Investors are just very uncertain; it’s very opaque,” said Kenichi Hirano, operating officer at Tachibana Securities. “Sometimes these negotiations break down, and maybe that’s Hon Hai strategy.” He added that he expected the companies to reach agreement eventually.  Sharp dismissed the sudden departure of Mr. Gou. The two companies will resume talks as early as Friday, said a spokeswoman for Sharp, Miyuki Nakayama. Referring to Mr. Gou’s departure, she added, “That’s nothing to do with the talks. It was his schedule.”  Mr. Gou founded Foxconn four decades ago in Taiwan as a maker of plastic parts for televisions. Its rapid rise as a major assembler of TVs, computers and telephones, including those of the iPhone maker, Apple, has made Mr. Gou one of the richest people in Taiwan, with an estimated worth of $5 billion.  In March, Foxconn agreed to pay ¥67 billion, or $853 million, or ¥550 a share, for 9.9 percent of Sharp, but it reopened talks in August to seek a lower price after Sharp’s stock slumped below ¥200 and mounting losses cast doubt on its future.  Mr. Gou has said that his taking a stake in Sharp will depend on whether the Japanese company will take his advice on how to restore profitability.  An example of how such cooperation might work is under way at the Sakai plant that Mr. Gou visited Thursday.  The plant makes substrates of liquid crystal as thin as a credit card sandwiched between sheets of glass wider and longer than a large bed that can be cut into eight large television screens with little waste. With the process largely automated, labor represents a small proportion of overall costs.  The process offers Foxconn a profit-margin edge as the market for bigger televisions expands. Tapping into Foxconn’s procurement muscle and skill in cost control might give Sharp an advantage in the marketplace as it battles its South Korean rivals, Samsung and LG Electronics.  “Apple is set to launch its smart TV next year, and Apple needs Hon Hai to secure advanced TV panel technology,” said Simon Liu, vice president at Yuanta Financial’s fund unit, which owns Hon Hai shares.  Foxconn’s senior manager at the plant, C.C. Lin, said the partners might spend more than $1 billion to increase capacity, beginning next year, as demand from Foxconn’s customers increases.  The Taiwan company is also considering buying Sharp’s TV assembly plants in China and Mexico and might list the Sakai plant on the Taiwan stock exchange in two or three years, the factory manager said.  “It seems the talks between Terry Gou and Sharp’s management didn’t yield good results,” said Mr. Liu of Yuanta Financial. “Any agreement would probably have to wait until year-end.”
Terry Gou, the chairman of Foxconn, left Japan without announcing an expected deal to buy a stake, causing Sharp shares to decline 13 percent on Friday. The S.&P. move came after market close.