Two Japanese heavy-industry companies announced they were in talks on integrating their shipbuilding businesses. Ishikawajima-Harima Heavy Industries (IHI) and Kawasaki Heavy Industries planned to set up a joint venture to create Japan's second-biggest shipbuilder in October 2002. But the companies, which along with Mitsui Engineering Shipbuilding agreed in September to co-operate in building ships, said nothing had been decided yet.
It is expected the duo may sign a memorandum of understanding as early as next month to create a merged shipbuilder with annual sales worth 210 billion yen (US$1.7 billion). The profitable Mitsui was cautious about a merger, but IHI and Kawasaki Heavy were in a rush to conclude the deal. The naval shipbuilding division of Sumitomo Heavy Industries Ltd is also expected to join the alliance. Sumitomo Heavy's participation would create Japan's biggest shipbuilder, overtaking Mitsubishi Heavy Industries.The existing alliance between IHI, Kawasaki Heavy and Mitsui Engineering covers co-operation in raw-goods purchases and the development, design, marketing and sale of ships. The talks on expanding the alliance comes after Hitachi Zosen Corp and NKK Corp said in February they would consolidate their shipbuilding divisions in a new firm to be established around October 2002.
Japan's once-dominant shipbuilding industry has seen its market share shrink in recent years through increased foreign competition, particularly from South Korea and China.