Mitsubishi and Kawasaki look for new ways to ensure survival of struggling shipbuilding businesses

JIJI

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

Mitsubishi Heavy Industries will transfer shipbuilding operations, which is their founding business dating back 130 years, to a new subsidiary — Mitsubishi Shipbuilding Co. — which will be launched Jan. 1, 2018.

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

However, it is uncertain whether the businesses will turn around. A think tank analyst says domestic shipbuilders “need to go through realignments.”

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

“We’ll consolidate Mitsubishi Heavy’s shipbuilding bases, take 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 output capacity of five vessels per year.

Currently 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 move will be important to the future of the Mitsubishi’s shipbuilding operations, according to industry observers.

After incurring massive losses, Mitsubishi Heavy withdrew from the production of large passenger ships. The company decided to set up Mitsubishi Shipbuilding to reorganize the shipbuilding operations of the parent company and some subsidiaries.

In addition, Mitsubishi Heavy will also launch another subsidiary, Mitsubishi Heavy Industries Marine Structure Co.

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

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

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

The company aims to boost the rate of return on capital invested in its shipbuilding business 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 regulations 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.”