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Boeing 787 Battery Maker to Maintain Output Amid Probe

GS Yuasa Corp., the battery maker at the center of the probe into Boeing Co.’s grounded 787s, will maintain its production plan for car and aircraft lithium-ion cells even as the planemaker seeks approval for test flights.

GS Yuasa doesn’t expect a significant drag on sales with the Dreamliners ordered parked and is cooperating with investigators, Toshiyuki Nakagawa, a director, told reporters yesterday in Kyoto, Japan, where the company is based. GS Yuasa, also a supplier to Mitsubishi Motors Corp. and Honda Motor Co., kept its annual profit and sales forecast unchanged.

“We see no major concerns,” Jun Yamaguchi, an analyst at Credit Suisse AG in Tokyo, wrote in a report today. “Performance at domestic automobile batteries, domestic industrial batteries and power supplies, and overseas segments was largely in line with expectations.”

Boeing said last month it’s moving forward with plans to boost output and develop two new versions of its marquee jet even as the inquiry into battery faults continues. It is seeking U.S. Federal Aviation Administration approval to resume test flights, which would let the Chicago-based company study the 787’s lithium-ion power packs in operation.

Shares of GS Yuasa rose 1.5 percent to 336 yen as of the close of trading in Tokyo today, trimming the year-to-date decline to 2.9 percent.

No Damage

The company yesterday also reported net income in the nine months ended Dec. 31 dropped to 5.52 billion yen ($60 million), compared with 5.73 billion yen in the same period a year earlier. Revenue fell 4.6 percent to 196 billion yen.

“We’re cooperating with the investigation,” Nakagawa said. “We haven’t sensed any damage to our reputation at this point.”

GS Yuasa reiterated full-year sales of 288 billion yen and a net income of 8 billion yen. The company’s sales of lithium- ion batteries for aircraft are several hundred million yen, Nakagawa said.

U.S. and Japanese authorities are investigating GS Yuasa’s lithium-ion batteries after one caught fire on a Japan Airlines Co.-operated 787 last month, and another emitted smoke on an All Nippon Airways Co. plane a week later, causing an emergency landing.

Flight Cancellations

ANA said today it was extending cancellations of 787 flights through the end of February, with a total of 1,206 flights pulled and about 100,720 passengers affected. It said last week that cancellations had cut sales by 1.4 billion yen in January.

The U.S. National Transportation Safety Board, which is studying the GS Yuasa batteries with Chicago-based Boeing, last week said it found evidence of uncontrolled overheating with the JAL battery. Japan’s government also ended on-site inspections of GS Yuasa last month.

“I think we are probably weeks away from being able to tell people here’s what exactly happened and what needs to change,” NTSB Chairman Deborah Hersman said at a breakfast today with reporters in Washington.

GS Yuasa first demonstrated its technology in a prismatic lithium-ion battery in 1993. The company announced a multi-year, multi-million dollar contract in June 2005 to supply batteries for the 787 to Thales SA, Europe’s biggest defense-electronics maker.

Car Batteries

GS Yuasa, which also makes lead-acid batteries, seeks to build lithium-ion batteries into a core business and supplies them to Mitsubishi for its electric cars.

All four plants where GS Yuasa builds lithium-ion batteries are in Japan and the batteries supplied to the Dreamliners are made at a factory in its Kyoto headquarters.

GS Yuasa hasn’t made a profit on the technology yet. In the year ended March 2012, GS Yuasa’s lithium-ion batteries business had an operating loss of 3.26 billion yen, compared with a 1.27 billion-yen loss a year earlier, according to the company’s annual report. The company spent 30 billion yen, or 75 percent of its total capital investments, on the segment last fiscal year, according to its website.

A unit of GS Yuasa also won a contract in August to supply lithium-ion battery cells to the International Space Station. Boeing oversees all contract work at the space station as the National Aeronautics Space Administration’s prime contractor.

To contact the reporters on this story: Chris Cooper in Tokyo at ccooper1@bloomberg.net; Kiyotaka Matsuda in Tokyo at kmatsuda@bloomberg.net

To contact the editor responsible for this story: Anand Krishnamoorthy at anandk@bloomberg.net

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