12-12-2017

Mitsubishi, Kawasaki struggling in shipbuilding biz

Mitsubishi Heavy Industries Ltd. and Kawasaki Heavy Industries Ltd. are struggling to find a way out of the predicament that their shipbuilding operations are in.

Mitsubishi Heavy will transfer its shipbuilding operations, the company’s founding business with a history of more than 130 years, to a new subsidiary, Mitsubishi Shipbuilding Co., to be launched on Jan. 1, 2018.

Meanwhile, Kawasaki Heavy is moving its shipbuilding operations to joint companies in China.

But it is uncertain whether their operations will turn around. An analyst at a think tank says Japanese shipbuilders “need to go through realignments.”

Mitsubishi Heavy Senior Vice President Koji Okura, set to become president of Mitsubishi Shipbuilding, underlined his determination to revive the operations, which started in 1884 when the Mitsubishi group took out a lease of then government-owned Nagasaki Shipyard.

“We’ll consolidate Mitsubishi Heavy’s shipbuilding bases, take the leadership in the Japanese market and show the world [our technologies],” Okura recently said.

The shipyard, now called Nagasaki Shipyard and Machinery Works, mainly builds liquefied natural gas carriers, with an annual output capacity of five vessels. At present, the shipyard is operating at nearly full capacity. But in mid-2019, the facility will finish building all ordered vessels.

With no new orders currently in sight, Okura said, “We’ll be hitting bottom.” His next step would be important to the future of the Mitsubishi Heavy group’s shipbuilding operations, industry people say.

Mitsubishi Heavy withdrew from large passenger ship production after incurring massive losses. The company decided to set up Mitsubishi Shipbuilding as part of the reorganization of the shipbuilding operations of the parent and some subsidiaries.

In the reorganization, Mitsubishi Heavy will launch another subsidiary, Mitsubishi Heavy Industries Marine Structure Co.

 

The two new subsidiaries will focus on ship designing and development as well as construction of vessels requiring sophisticated technologies.

Meanwhile, the group will commission mass production of ships to highly competitive specialists, such as Imabari Shipbuilding Co.

Kawasaki Heavy will trim production capacities in Japan while transferring its shipbuilding operations to joint companies in China.

The company aims to boost the shipbuilding business’ rate of return on invested capital to 8 percent by fiscal 2020. It will consider selling the business if it is likely to miss the target.

Global shipbuilding volume was on an uptrend until 2011 but took a sharp downturn mainly because of excess production.

Demand is expected to recover thanks to tougher environmental regulation taking effect in 2020. But competition from Chinese and South Korean companies remains harsh. “We’re not in a situation where we can expect to make a leap,” said Yasuhiko Kato, chairman of the Shipbuilders’ Association of Japan. “We need to consider how to survive.

Source- The Japan News

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