MHI to Spin Off Ship Construction and Hull Block Manufacture in Commercial Vessel Business at Nagasaki, Establishing Two New Group Companies
-- Structural Reforms to be Pursued in Quest for Core Competence in Selected Products --

Of the two new companies, the ship construction entity will be launched as a company succeeding to MHI Ship & Ocean Engineering Co., Ltd., an MHI group company, that will undertake sales, engineering, procurement, manufacture, construction and repair services. New ship construction operations will focus on LNG (liquefied natural gas) and LPG (liquefied petroleum gas) carriers, vessels that are expected to be in strong demand beyond the near term. The overarching goal is to strengthen cost competitiveness 1) by streamlining production through continuous construction of gas carriers - a vessel type in which it excels; 2) by enhancing efficiency through the development of a more compact organization; and 3) by streamlining administrative processes within a more dynamic business structure.

The hull block manufacturing company will initially get under way in the form of a preparatory company, followed by an absorption-type split. The new entity will specialize in large-scale hull blocks, an area in which the Koyagi Plant excels, and will pursue enhanced productivity primarily by continuous construction of such blocks and refurbishing of its physical plant. Besides supplying blocks to the new ship construction company, the firm will also promote their sale to customers outside the MHI Group. Plans also call for annual production volume to be progressively expanded.

MHI presently undertakes shipbuilding operations in commercial vessels at two locations - Nagasaki and Shimonoseki - having gradually consolidated from its original five ship construction bases in response to changes in the commercial ship market commencing in the 1980s. The Nagasaki Shipyard & Machinery Works has long handled a wide spectrum of technologically advanced large commercial ships. Going forward, by pursuing core competence in specific product lines, making its business operations more compact, and making full use of the production resources at its disposal, initiatives will focus on streamlining operations and further developing MHI's ship construction business.

No changes will be made in the structures of shipbuilding activities for commercial vessels at Shimonoseki Shipyard & Machinery Works and vessels for the Japan Ministry of Defense at Nagasaki Shipyard.