Japanese Shipbuilding Consolidation Is Imminent

Kawasaki Heavy Industries is said to be considering integrating its shipbuilding business with those of Ishikawajima-Harima Heavy Industries Co. (IHI) and Mitsui Engineering & Shipbuilding Co. A spokesman for Kawasaki Heavy, Japan's second-largest heavy machinery and shipbuilding firm, said it sees such consolidation as one option but no accord has been reached. Business daily Nihon Keizai Shimbun reported on Wednesday that IHI and Kawasaki Heavy had reached a basic agreement to merge their shipbuilding businesses in an equally owned joint venture in October 2002. Third-ranked IHI said separately in a statement on Wednesday that it is considering consolidating its shipbuilding business with Kawasaki Heavy but they have not reached final agreement. "We will continue to concentrate on current cooperation with the two companies," the Kawasaki spokesman said.

Kawasaki and sixth-ranked Mitsui started cooperation in 1999 on procurement, market research, design and output and IHI joined the two firms' alliance late last year. Kawasaki originally planned to integrate its shipbuilding operation with that of Mitsui Engineering, whose shipbuilding business is profitable, but Mitsui has been cautious about the rationalization plan, while Kawasaki Heavy and IHI needed to urgently integrate their loss-making shipbuilding businesses to cut costs, the daily said. The naval shipbuilding division of fourth-ranked Sumitomo Heavy Industries is also expected to join the venture, which would create a four-company alliance bigger than industry leader Mitsubishi Heavy Industries, the daily said. No immediate comment from Sumitomo Heavy was available. - (Reuters)