Hitachi Zosen and NKK Corporation said they would merge their shipbuilding operations into a fifty-fifty joint venture to be established in October 2002, as the global industry becomes increasingly competitive. The two companies will set up a preparation committee to work out the details of the merger. "There is a limit to what we can do if we compete independently against South Korean shipbuilders," Hitachi Zosen President Iso Minami said at a news conference, attributing the merger to price-cutting competition from South Korean shipbuilders.
Combining their shipbuilding operations, the joint venture will have 150 billion yen in sales with about 3,000 employees and six plants across Japan, the companies said in a statement. On a sales basis, the new company will be the second largest shipbuilder in Japan, after Mitsubishi Heavy Industries Ltd. Hitachi Zosen is expected to spin off its shipbuilding operation in fiscal 2001, beginning April 1, to prepare for the merger.
Hitachi Zosen and NKK have been pursuing the merger plan since last May, when they announced their intent to enter into discussions aimed at forming an alliance of their shipbuilding operations in a bid to cut costs in the areas of marketing, design, procurement and manufacturing. The two companies said they expect the merger will help them rationalize operations and strengthen their competitive edge in the tough international market through lower costs and speedier development of new technologies and products.
Japanese shipbuilders have recently seen an increase in orders but remain under pressure to slash costs and improve profitability to compete with other players, especially South Korean makers. South Korean shipbuilders have recently lowered their prices by taking advantage of the decline in the value of the won.