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Japanese shipbuilders plan reforms to weather losses

The Yomiuri Shimbun

A large cruise ship under construction is seen in this photo taken in September 2016 in Nagasaki.

The Yomiuri ShimbunMajor shipbuilding companies are implementing structural reforms, such as scaling down unprofitable businesses and launching tie-ups with other companies to reduce costs.

This has been prompted by worsened business performance, with orders for ships having decreased worldwide and with companies incurring huge losses.

If effects of the reforms are limited, it is possible that a realignment of the industry will occur as a result in the future.

On March 31, Kawasaki Heavy Industries Ltd. announced that it will relocate its main cargo ship production base from Japan to China in fiscal 2020.

A joint venture firm to be established by Kawasaki Heavy Industries and its Chinese partner will mainly be in charge of building the kind of ships necessary for such operations.

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  • The Yomiuri Shimbun

Kawasaki Heavy Industries will scale down its merchant ship business in Japan by about 30 percent, and concentrate on building work to its plant in Sakaide, Kagawa Prefecture.

Kenji Tomida, senior executive vice president of the company, who was promoted from managing executive officer in April, alluded to the possibility of job cuts during a telephone conference for investors held on March 31.

“Though we can reduce employee numbers to a certain degree through attrition and scaling back on new hiring, we are also considering subsequent measures,” he said.

Mitsubishi Heavy Industries Ltd. announced March 31 that it had reached basic agreements with Imabari Shipbuilding Co., based in Imabari, Ehime Prefecture, and Namura Shipbuilding Co., based in Osaka, for a business tie-up.

The companies plan to jointly develop environmental protection technologies and also to reduce costs by using common parts.

Mitsubishi Heavy Industries is also holding negotiations for a business tie-up with Oshima Shipbuilding Co. based in Saikai, Nagasaki Prefecture.

Mitsubishi Heavy Industries incurred huge losses from initiatives to build large passenger ships, and thus presented a plan to spin off its merchant ship business.

However, it is uncertain whether those measures for improving management conditions will be effective.

Orders for ships have remained low worldwide, because of slackening after a last-minute demand surge that continued through 2015 due to toughened environmental regulations.

No recovery of demand is in sight.

Some view the situation as encouraging a realignment of the shipbuilding industry.

On March 30, Mitsui Engineering & Shipbuilding Co. announced that it will shift to a holding company system in April 2018.

The company said that it will implement a drastic strategy, including mergers and acquisitions with other companies, while clarifying the independence and management responsibilities of each of its business categories.Speech

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