By Chris Cooper and Kiyotaka Matsuda
(Bloomberg) — Mitsubishi Heavy Industries Ltd. is considering options for its shipbuilding business to reduce costs as persistently weak demand for vessels prompts companies in the industry to take measures to reorganize their operations and form partnerships.
The company is considering a capital tieup with three Japanese shipbuilders — Namura Shipbuilding Co. as well as closely held Imabari Shipbuilding Co. and Oshima Shipbuilding Co., Yoichi Kujirai, a senior executive vice president at Mitsubishi Heavy, said Tuesday. The company, which already has a partnership with Imabari and Namura to build ships, had said in August that it was in talks with the three companies on an alliance.
“We’re looking at ways to cut costs,” Kujirai said at a briefing in Tokyo. “We’re still looking into it, but options include how we build ships, capital tieups and making our shipbuilding operations a subsidiary.”
Mitsubishi Heavy joins Kawasaki Heavy Industries Ltd. in reviewing its shipbuilding business as vessel-makers worldwide take steps such as reducing capacity, cutting jobs and selling assets amid a drought in orders. Tuesday, Mitsubishi Heavy also said it will limit production of cruise ships to small- and mid-sized vessels, after the first of two cruise ships ordered for Aida Cruises in 2011 was finally delivered earlier this year following multiple delays.
The company will make a decision on restructuring shipbuilding operations by the end of March, Kujirai said.
Mitsubishi Heavy builds liquefied petroleum gas, liquefied natural gas, bulk and container ships, as well as car carriers and tankers. It hasn’t reported a revenue breakdown for the vessel business since the year ended March 2013, when shipbuilding and ocean development accounted for 8 percent of revenue, according to data compiled by Bloomberg.
The company, which also builds aircraft and power-plant equipment, booked combined losses of 237.5 billion yen ($2.3 billion) in its cruise-ship construction business alone in the last three fiscal years ended March 31, according to figures from Mitsubishi Heavy.
In July, Mitsubishi Heavy cut its net income forecast for the year ending March 31 to 100 billion yen, from an earlier prediction of 130 billion yen. Sales will probably rise to 4.3 trillion yen, less than the 4.4 trillion yen estimated earlier, it said at the time.
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