Kawasaki Moves Shipbuilding Workers, Targets LNG to Boost Profit

Kawasaki Heavy Industries Ltd. (7012), the maker of industrial machinery that fired its president and ended merger talks with Mitsui Engineering & Shipbuilding Co. (7003) in June, relocated workers from a yard in Japan with excess capacity to other domestic plants to streamline operations.

The builder of everything from liquefied natural gas tankers to submarines reduced the number of temporary workers and moved about 70 employees at its Sakaide yard to other domestic plants making gas-powered engines, plane parts and hydraulic equipment, Shigeru Murayama, who assumed the role of president on June 13, said Sept. 9 in an interview in Tokyo.

The steps at Kobe, Japan-based Kawasaki Heavy are in response to a supply glut that has hit prices, squeezing profits among shipbuilders in Asia, where most of the global production is based. In response, Kawasaki is focusing more on LNG tankers as Japan seeks to secure cheaper energy sources after the Fukushima nuclear disaster in 2011.

“The Japanese will just have to build technologically sophisticated ships,” said Murayama. “We expect the shale-gas revolution will bring big demand for LNG ships and our strategy focusing on that type of vessel was right.”

Mitsui, the most reliant of Japan’s major heavy machinery makers on shipbuilding for sales, has teamed with other builders in Japan to bid for contracts to service shale gas projects in the U.S., President Takao Tanaka said Aug. 28 in an interview in Tokyo, without specifying the potential partners.

LNG Focus

Kawasaki is considering building LNG ships at a lower-cost Chinese venture, Murayama said. Such a move would be the first time for a Japanese shipbuilder to construct a high-end vessel outside Japan.

Kawasaki Heavy, better known in the U.S. as the producer of Ninja motorcycles, fell as much as 1.3 percent, or 5 yen, to 380 yen as of the midday break in Tokyo. The Nikkei 225 Stock Average dropped as much as 0.5 percent.

The company’s aerospace unit, which Murayama headed until June, may spend about 20 billion yen ($200 million) to build a new plant in central Japan in 2015 to expand deliveries of fuselage parts as Boeing Co. ramps up production of the 787 Dreamliner, he said. The new facility may increase capacity to build fuselage parts for fourteen 787s per month, up from 7, he said.

The company is also building a new plant to make motorcycles in Indonesia and adding facilities at its Thai factory, he said.

In June, Kawasaki Heavy removed Satoshi Hasegawa as the president and said it scrapped talks with Mitsui Engineering to combine, two months after denying merger talks had been held.

Kawasaki executives concluded a combination wouldn’t provide many benefits, Murayama said in the interview.

To contact the reporter on this story: Masumi Suga in Tokyo at msuga@bloomberg.net

To contact the editor responsible for this story: Jason Rogers at jrogers73@bloomberg.net

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