Mitsubishi to Downsize Shipbuilding Operations

Japan's Mitsubishi Heavy Industries is planning to stop taking new orders for large passenger ships, downsizing its shipbuilding operations due to a slump in orders, the Nikkei newspaper reported on Sunday.

The plans by Japan's fourth-largest shipbuilder come as new shipbuilding orders have declined 80 percent so far this year, the Nikkei said. Citing unidentified sources, it said the company was considering splitting off its planning and design division and sharing shipyards with other companies.

A spokesman for Mitsubishi Heavy Industries, which also builds aircraft and defense equipment, said the report was not based on information provided by the company and declined further comment.

Mitsubishi Heavy took a 103.9 billion yen ($1.01 billion) loss on its cruise ship construction operations in the year ended March, having delayed the delivery of a cruise ship produced for Carnival Corp by more than a year.

In a presentation on the group's third quarter 2015 financial results in February, president and CEO Shunichi Miyanaga told investors that it was time for transparency on the troubles its shipyard division had had with the first-in-class AIDAprima, its first vessel for a Carnival Group company since 2004. There were several areas of difficulty, he said: the planning phase for AIDAprima caused challenges and delays; the specifications for safety systems, shipboard amenities and technologies had changed since the yard’s last Carnival cruise ship order; and a series of communications and design approvals problems held back production, he said. AIDAprima was to be delivered at the end of 2014, but she wasn't handed over to Carnival until March of this year.

The Nikkei said Mitsubishi Heavy Industries was planning to reduce risks in its shipbuilding operations by focussing on building smaller ships, which have simpler specifications. In August, Mitsubishi Heavy Industries announced its intention to start discussions toward forming new alliances with three Japanese shipyards: Imabari Shipbuilding, Oshima Shipbuilding and Namura Shipbuilding.