Ishikawajima-Harima Heavy Industries Co. and Kawasaki Heavy Industries Ltd. said Tuesday they will integrate their shipbuilding operations into an equally owned venture to be formed on Oct. 1, 2002.

The new venture will aim for 200 billion yen in sales in the fiscal year to March 2005, with the ratio of pretax profit to sales at between 2 percent and 3 percent, the two firms said. The venture will have 3,500 employees.

The move will create Japan’s second-largest shipbuilder, after Mitsubishi Heavy Industries Ltd.

“We have agreed it is the best policy for us to integrate our shipbuilding operations to meet social needs and reinforce our position in the world’s shipbuilding industry,” the two companies said in a statement.

Last September, IHI, Kawasaki Heavy and Mitsui Engineering & Shipbuilding Co. announced a comprehensive three-way shipbuilding alliance. But IHI and Kawasaki have decided to go ahead themselves first, while keeping cooperative ties with Mitsui, officials of the companies said.

The IHI-Kawasaki alliance is likely to expand to include Sumitomo Heavy Industries Ltd., as IHI has already agreed with Sumitomo Heavy to integrate production of naval ships, they said.

Hitachi Zosen Corp. and NKK Corp. have also agreed to merge their shipbuilding operations in October 2002.

The series of alliances will consolidate Japan’s shipbuilding industry, which currently has seven players, into three major groupings.

IHI’s shipbuilding division had 124.6 billion yen in sales in the business year to March 31, 2000, ranking second in Japan. Kawasaki had 88 billion yen, ranking third.

Their combined sales of 212.6 billion yen still fell short of the 268.9 billion yen of Mitsubishi Heavy, but if Mitsui Engineering and Sumitomo Heavy join the two, the entity will become Japan’s largest.

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