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Mitsubishi Heavy Industries, Ltd.

Mitsubishi Heavy Industries, Ltd.

5-1, Marunouchi 2-chome
Chiyoda-ku, Tokyo 100
Japan
Telephone: +81-3-3212-311
Fax: +81-3-3212-9800
Web site: http://www.mhi.co.jp

Public Company
Incorporated: 1964
Employees: 39,366
Sales: ¥2.45 trillion ($27.25 billion) (2000)
Stock Exchanges: Tokyo Osaka Nagoya Kyoto Hiroshima Fukuoka Niigata Sapporo
NA1C: 336611 Ship Building and Repairing; 336411 Aircraft Manufacturing (pt); 23595 Bridge and Tunnel Construction (pt); 221113 Nuclear Electric Power Generation; 33312 Construction Machinery Manufacturing; 3332 Industrial Machinery Manufacturing; 333291 Paper Industry Machinery Manufacturing; 3334 Ventilation, Heating, Air-Conditioning, and Commercial Refrigeration Equipment Manufacturing; 333611 Turbine and Turbine Generator Set Units Manufacturing

Mitsubishi Heavy Industries, Ltd., Japans largest shipbuilding and machinery maker, is a mammoth company involved in an array of industrial concerns. With nearly 150 subsidiaries, Mitsubishi Heavy Industries (MHI) operates in 11 key sectorsShipbuilding, Nuclear Energy Systems, General Machinery and Components, Paper and Printing Machinery, Steel Structures and Construction, Machinery and Plants, Air-Conditioning and Refrigeration Systems, Machine Tools, Power Systems, Aerospace Systems, and Industrial Machineryand produces everything from cruise ships and oil tankers, to construction machinery, newsprint machines, turbines, airplanes, gasoline engines, and gear cutting machines. The company also builds nuclear power plants, bridges, and sports stadiums. MHI traces its history back to the latter part of the 19th century, and has demonstrated its ability to withstand periodic downturns in the Japanese economy. These economic vagaries have prodded the company to shift its focus among various sectors over the years. Shipbuilding, for example, was once the heart of MHI, but the company has concentrated more recently on aerospace and power systems as demand for its large ships has waned. MHIs adaptive skills were looking to be tested again at the dawn of the 21st century, as the company addressed various management problems and redundancies.

MHIs Origins: The 19th Century

Since the 1880s the diversified collection of industrial manufacturers now known as MHI has constituted the heart of the vast Mitsubishi group. Essentially all of Mitsubishis many industrial offspring were developed as adjuncts to its shipbuilding business, begun in 1884. The Mitsubishi interest in shipping and shipbuilding extends back to the groups founding in 19th-century Japan. Yátaro Iwasaki, born in 1834 to a rural samurai family, early in his life became an official with the Kaiseken, the agency responsible for regulating trade in his native Tosa domain, on the island of Shikoku. By adroitly straddling the roles of public official and private entrepreneur, Iwasaki was able to start a small shipping company in the late 1860s. In 1875 the Japanese government gave Iwasaki the 13 steamships that he had operated on its behalf during a brief military engagement with Formosa, making his newly named Mitsubishi Shokaior Three-Diamond Company, the source of the firms logothe dominant shipping agent in Japan.

With extensive mining interests and a talent for currency speculation, Iwasaki became so successful that the government created a rival shipping firm, the KUK, to foster competitive pricing. After a short fare war that threatened the ruin of both firms, Mitsubishis shipping assets were merged with those of the KUK in 1885 to form a single, state-sponsored company. Mitsubishi retained a small amount of stock and exercised some control in the new firm, but its interest shifted to land-based industries, in particular mining and shipbuilding. In 1884, unable to make a go of shipbuilding, the Japanese government had loaned and then transferred outright its two leading shipyards to the private sector. Mitsubishi took control of the best of these, located in Nagasaki, and became Japans premier builder of ships and the only one capable of competing in the international marketplace.

Japans shipbuilding industry was still relatively primitive, however, and remained so until the 1896 Shipbuilding Promotion Law combined with the Sino-Japanese War to spur domestic demand. Mitsubishi, by this time known as Mitsubishi Goshi Kaisha, became the favorite supplier of large oceangoing vessels to the state shipping company NYK, building 43 percent of all ships ordered between 1896 and World War I. Despite the close ties between the two companies, it appears that Mitsubishi did not receive preferential treatment. Indeed, although Mitsubishi gained fame in 1898 as the supplier of Japans first oceangoing steamshipthe 6,000-ton Hitachi Maruits delivery was so tardy that the NYK awarded a second, similar contract to a British firm.

From 1896 through 1904, the eight years between Japans wars with China and Russia, Mitsubishis shipbuilding business increased by nearly 300 percent. In 1905 it acquired a second dockyard, in Kobe, and by 1911 employed some 11,000 workers at Nagasaki alone. Mitsubishis shipbuilding division was not yet especially profitablea disproportionate amount of the parent companys profits still came from mining and stock dividendsbut it soon gave rise to a panoply of subordinate industries that supplied the yards with raw materials and parts. For example, in 1905 the Kobe yard spawned what would eventually become Mitsubishi Electric Corporation, a leading manufacturer of generators and electric appliances. Other shipbuilding divisions grew into power plants and independent producers of airplanes, automobiles, and heavy equipment. Bolstered by its highly profitable mining interests, Mitsubishi was able to afford the vast sums of money and years of work required to transform its subsidiaries into world leaders.

The Early 20th Century and World War I

When World War I began in 1914, Japanese shipping lines were unable to procure a sufficient number of foreign ships to maintain their booming business, and so turned to local manufacturers such as Mitsubishi. Japanese production increased more than tenfold between 1914 and 1919, with Mitsubishi leading the field. So great was the surge in business that the Iwasaki family, still in control of Mitsubishi Goshi Kaishathe groups holding companydecided to spin off a number of its leading divisions into separate, publicly held companies, thereby gaining access to outside capital without substantially weakening the companys dominant position. In 1917 the Mitsubishi Shipbuilding Company (MSC) was created, along with Mitsubishi Bank, Ltd., Mitsubishi Iron Works, and a trading company for the entire group, now called Mitsubishi Corporation. The major components of the Mitsubishi zaibatsu, or conglomerate, were thus in place by 1920, although the ensuing years would bring many modifications to its structure.

As is generally the case, the wartime buildup in ship orders was followed by a severe depression. As business declined below prewar levels many shipbuilders were bankrupted and all were forced to impose drastic layoffs. The slump continued throughout the 1920s, merging into the Great Depression. Mitsubishis lack of shipbuilding contracts continued until the beginning of World War II. In the meantime, however, MSC was actively pursuing a number of other technological developments, most notably the airplane and the automobile. Having made its first airplane in 1916 and first automobile in the following year, MSC grouped these products under the name Mitsubishi Internal Combustion Engine Manufacturing Company in 1920. This offshoot went through several changes before taking the name of Mitsubishi Aircraft Company in 1928, at which time it was already one of Japans leading manufacturers of military aircraft. After six years of independence, however, the aircraft and automobile facilities were once again united with MSC to form Mitsubishi Heavy Industries in 1934. It is not clear why this strategy was adopted, but the imminent prospect of war with China may have suggested the need for a more unified industrial force.

Company Perspectives:

Today, we are expanding our businesses through technological innovations stemming from a global perspective and the development of enterprises aimed at achieving harmony in the international community. Starting with the construction of various facilities which provide comfort and adhere to local culture and customs, we have in recent years been grappling with issues of common concern to all of mankind like the development of new sources of energy and environmental protection. Marching toward the 21st century, MHI will continue to challenge issues that will be confronting us in the future such as ocean development and space programs. Our determination to conduct business on a global scale is supported by, and reflected in, a fundamental philosophy: utilization of technological expertise accumulated over more than a century to assess changes that occur with the passage of time while continuously developing previously unexplored areas. Together with the trust we have earned today, our untiring effort has become the driving force for building a new tomorrow.

Insuring harmony between mankind, technology and nature. Seeking a more prosperous future, MHI is moving steadily ahead.

World War II

To stimulate the moribund shipping industry, the Japanese government instituted the Scrap and Build Scheme in 1932. This policy called for shipowners, aided by government subsidies, to replace their older vessels with a smaller number of new, more efficient ships. In this way Japans excess capacity could be reduced while simultaneously modernizing its fleet and promoting new shipbuilding technology. As the leading Japanese builder, Mitsubishi Heavy Industries (MHI) greatly benefited from this program, and even more so from the programs successor, the 1937 Superior Shipbuilding Promotion Scheme. This campaign was clearly prompted by Japans preparations for war, as it subsidized the construction of large cargo ships with an eye to their eventual use for the transportation of troops and supplies. In the years following, government intervention in shipbuilding escalated to outright control, as the Imperial Navy placed all dockyard facilities under its direct command in 1942. The MHI yards at Nagasaki and Kobe produced a wide range of government warships, including the worlds largest battleship, the Musashi. In addition, MHI used its aircraft experience to build 4,000 bombers and some 14,000 of the famous Zero fighters, widely recognized as the finest flying machine in the Pacific during the wars early years. The Zero provided an early example of the cost efficiency and quality that marked Japanese industrial design. A lightweight machine, the Zero could be produced quickly and economically, yet it boasted superior aerobatic abilities and heavy firing power. The Zero made Mitsubishi infamous in the West, discouraging postwar marketers of other Mitsubishi products from highlighting the company name in advertising.

At the end of the war in 1945, an estimated 80 percent of Japans shipyards were still in usable condition. Mitsubishis main yard at Nagasaki, however, did not escape the effects of the worlds second atomic explosion. At wars end the occupying Allied forces halted all shipbuilding activity, restricting the heart of Japans industrial economy. During the two years in which this ban remained in effect, MHI kept busy by repairing damaged vessels and even using its massive plants for the manufacture of furniture and kitchen utensils.

Challenges After World War II

With the growing realization that Japan could be a strategic asset in the postwar battle against Asian communism, the Allies relaxed the more stringent limitations, and many Japanese companies resumed production. For MHI, occupation forces waited until 1950 to chop its mighty assets into three distinct and geographically separated firms: West Japan Heavy Industries, Central Japan Heavy Industries, and East Japan Heavy Industries. Part of an effort to destroy the Mitsubishi zaibatsu as a recognizable entity, the division of MHI was intended to force the three companies to compete against each other for contracts, thus hindering their growth.

The rest of the Mitsubishi group was similarly fragmented, and although it gradually reassumed its former shape, the Iwasaki family no longer controlled the various subsidiaries by means of a single holding company. Instead, each of the major Mitsubishi companies acquired stock in its fellow companies, and a triumvirate composed of the former MHI companies, Mitsubishi Bank, and the groups trading company became the unofficial head of what remained a voluntary economic entity. It is remarkable that this loosely connected portfolio of war-ravaged corporations should then have proceeded to outperform its global competitors over the next few decades. The three heavy-industry companies, in particular, faced an almost impossible situation. Forced to compete with one another, forbidden from pursuing the military contracts that had formerly provided a huge portion of its business, and confronted by international competitors whose technological progress had not been interrupted by the war, the new MHI trio appeared destined for failure.

Several factors combined to help MHI get past this critical period. The 1947 Programmed Shipbuilding Scheme provided low-interest government loans to the shipping companies that needed but could not afford new vessels. In effect, the government decided which ships should be built and helped pay for them, injecting the capital needed to restart a business cycle that had nearly ground to a halt. Secondly, the three companies were able to use some of their idle aircraft facilities in the manufacture of motor scooters and automobiles. Under the direction of the head designer of the Zero, Kubo Tomyo, the rejuvenated auto division sold about 500,000 scooters before the government asked it to resume making small autos in 1959. Thirdly, Japans shipbuilders realized that the Japanese economy depended on ships and their manufacture, and that if Japanese ship producers could not compete in the postwar international market the entire nation would suffer.

Driven by such a threat to its existence, the former MHI companies hired an increasing number of highly competent engineering graduates from Japans leading universities and set them to work emulating the advanced technology of the United States and Western European countries. Able to rely on trade unions that were loyal and flexible in the extreme, they were soon producing oceangoing vessels equal in quality to but less expensive than anything made in the West. The Korean War of 1951-53 triggered a huge increase in orders and, after surviving the short depression following the war, the companies were able to exploit the rapidly developing worldwide demand for oil tankers. The tanker market was in turn given a tremendous jolt by the Suez Canal crisis of 1956, since the canal closing sparked a surge of orders for larger, more efficient ships able to complete the long journey around Africa. Between 1954 and 1956 total orders at Japanese builders more than tripled to 2.9 million gross tons, of which at least two-thirds were placed by foreign shipping companies.

Growth in the 1960s and 1970s

The post-Suez depression in shipbuilding was severe enough to prompt fresh diversification at MHI. Increased research financing was devoted to civil engineering, plant construction, and automobiles, all of which MHFs years of experience in heavy industry had well prepared it to undertake. In 1958, in cooperation with 23 other Mitsubishi Group corporations, Mitsubishi Heavy Industries created Mitsubishi Atomic Power Industries. Since then, MHI continued to dominate contemporary Japanese production of atomic power. Automobile production rose steadily, if not as quickly as at rivals Toyota and Nissan, and by 1964 the Nagoya plants were manufacturing 4,000 cars per month. Even aircraft production had been resumed by the early 1960s.

Key Dates:

1875:
Yátaro Iwasakis company, Mitsubishi Shokai, becomes the largest shipping company in Japan.
1917:
Mitsubishi Shipping Company is created.
1934:
Mitsubishi Shipping Company is merged with Mitsubishi aircraft and automobile operations to form Mitsubishi Heavy Industries (MHI).
1950:
Allies divide MHI into three separate firms.
1956:
Suez Canal crisis boosts global tanker market.
1964:
MHI is reunified.
1970:
MHI spins off the Mitsubishi Motor Company.
2000:
MHI reports its first ever annual loss.

With the world increasingly dependent on imported oil and Japans construction skills honed to perfection, Mitsubishi was hit by an avalanche of orders for tankers during the 1960s and early 1970s. To accommodate this extraordinary boom, the three parts of MHI were once again united, resulting in the 1964 rebirth of Mitsubishi Heavy Industries. This giants 77,000 employees and $700 million in sales were spread among a handful of the most important heavy industries, but shipbuilding commanded the bulk of MHIs resources. A new dock with 300,000-gross-ton capacity was built at Nagasaki in 1965, followed by the 1972 completion of a mammoth 1-million-gross-ton supertanker facility at the same yard. This ultra-efficient dock enjoyed only a short life, howeverthe oil crisis of 1973 and 1974 soon brought tanker orders to a near standstill, permanently crippling the entire Japanese shipbuilding industry.

Economic Downturn: 197585

The economic downturn was devastating. By 1975, the last of the peak tanker years, 40 percent of MHI sales and one-third of its workers were involved in shipbuilding. By 1985 those numbers had plummeted to 15 percent and 17 percent, respectively. But MHI managed to shift its assets quickly enough to survive. Having already spun off its automobile division to form Mitsubishi Motors Corporation in 1970, MHI aggressively pursued clients in the power-plant and factory-design fields. It also reclaimed its position as the top supplier of military hardware to Japans growing defense force. At the same time, MHI streamlined its production facilities by shifting employees from older industries such as shipbuilding to newer ones such as machinery and power-plant production, and simultaneously allowed natural attrition to shrink its overall labor bill. Thanks in no small part to this diversification, MHI emerged successfully from the disastrous downturn of the shipbuilding industry, and became an industrial leader in other areas as well.

The 1990s

The early 1990s brought a fresh set of challenges to MHI. A weakening of the global economy and the post-Gulf War oil shock caused a downturn in the companys sales. Moreover, the strength of the Japanese Yen made it difficult for MHFs ships and heavy equipment to compete in the global market against equipment produced in countriesespecially South Koreawith weaker currencies. To compensate, MHFs shipbuilding division embarked on a program of heavy cost-cutting in 1992. But the situation took a toll, and the companys other division continued to account for greater percentages of MHFs total sales.

By the mid-1990s it looked as though MHI had weathered the storm to become an even stronger force. Its construction and power sectors flourished as the company won a number of lucrative contracts. In February 1996, for example, MHI was selected to build six gas turbine thermal power plants for Dubai Electricity and Water Authority in the United Arab Emirates. Two months later, MHI received an order to construct a fertilizer plant for R.P. G. Industries of India, and also teamed up with two Chinese companies (Baoshan Iron & Steel Corp. and Changzhou Metallurgical Equipment Corp.) to produce steel-making parts and equipment in China.

The resurgence of Japans shipbuilding industry in the mid-1990s seemed to complete MHFs revival. The yen had at last begun to weaken, making it easier for Japanese companies such as MHI to compete effectively against their Korean rivals. In addition, global demand for tankers and ships boomed, since the worlds commercial fleets had aged. By 1996, in fact, roughly 41 percent of all tankers were more than 20 years old and approaching the end of their useful life span. In this new environment, MHFs shipbuilding division benefited from the companys cost-cutting measures of the early 1990s, as well as from more recent advances in computer-aided design that maximized efficiency.

Prudently, MHI did not abandon its efforts to emphasize its other divisions despite the renaissance in the shipbuilding sector. In fact, MHI not only looked to new sectors in Japan to drive its recovery, it also sought out new markets abroad for its equipment and services. Southeast Asia and the Middle East sorely needed new power sources, and as the global economy boomed, the private and public sector undertook major construction projectswhich drove demand for MHFs equipment. Late in 1996, MHI won a $1.1 billion contract to install a 2,400 megawatt power plant for the Saudi Consolidated Electric Co., as well as a contract worth about $127.8 million to supply generators for Taiwan Power Co.s new nuclear power plant. MHI continued to boom in 1997. After winning a contract to build a fertilizer ammonia plant for Indonesias PT Kaltim Pasifik Amoniak, MHI was selected by Saudi Yanbu Petrochemical Co. to build polyethylene and ethylene glycol plants.

The year 1998, however, saw a dramatic reversal of this positive trend. Dragged down by the repercussions of the currency crisis that rocked Thailand and other developing countries, Japans economy slumped along with the rest of Asia. MHFs sales slowed as its key customers cut back on construction and infrastructure projects in response to the growingAsian economic crisis. By October 1998, though, it was clear that MHI could not blame its problems entirely on outside economic forces. MHI had counted on foreign markets to make up for sluggish sales at home through the first part of the 1990s. In an effort to boost its profits even more, MHI had outsourced much of its foreign production to subcontractorswithout ensuring appropriate supervision. The result was that some of the massive construction and power projects MHI had undertaken in Southeast Asia and the Middle East were hindered by poor quality. As the Asian Wall Street Journal reported, these quality control issues severely undercut the profitability of MHFs foreign operations. In fact, the company eventually had to redo some of the work itselfhurting its earnings.

The companys sales and profits dropped further in 1999, as Japan remained mired in the Asian economic crisis. Nobuyuki Masuda stepped down as MHIs president to become chairman of the board. In his place Takashi Nishioka was appointed president. Nishioka had won the admiration of shareholders during his tenure as head of MHIs aerospace operations, playing an essential role in moving that division away from its longstanding reliance on defense contracts. Instead, Nishioka had looked to the private sector for business, focusing particularly on bolstering MHIs business ties with Boeing.

Upon taking the helm, Nishioka announced a massive restructuring program, involving 7,000 job cuts, a reorganization of the companys engine and motor operations, and an expansion of its aerospace division. Perhaps more importantly, Nishioka promised to end MHIs policy ofmatrix management, in which the companys branch offices competed among themselves and with the division headquarters. In place of this inefficient system, Nishioka pledged to unify management functions.

These changes would take time to implement, though. In 2000, with Japans domestic economy still in the doldrums, MHI reported its first net loss since the company had been reunified in 1964. Despite this significant setback, Nishioka remained optimistic that MHI would recover from its latest problems. He predicted that the company would return to profitability by 2003.

Principal Subsidiaries

Mitsubishi Heavy Industries America, Inc. (U.S.A.); MHI Corrugating Machinery Company (U.S.A.); Mitsubishi Engine North America, Inc. (U.S.A.); MHI Forklift America, Inc. (U.S.A.); Bocar-MHI S.A. de C.V. (Mexico); Mitsubishi Brasileira de Industria Pesada Ltda. (Brazil); CBC Indústrias Pesadas S.A. (Brazil); ATA Combustão Tecnica S.A. (Brazil); Mitsubishi Heavy Industries Europe, Ltd. (U.K.); MHI Equipment Europe B.V. (Netherlands); Saudi Factory for Electrical Appliances Company, Ltd. (Saudi Arabia); Bohai & MHI Platform Engineering Co., Ltd. (China); Mitsubishi Heavy Industries (Hong Kong) Ltd.; MHI-Mahajak Air-Conditioners Co., Ltd. (Thailand); Thai Compressor Manufacturing Co., Ltd. (Thailand); Highway Toll Systems Sdn. Bhd. (Malaysia); MHI South East Asia Pte. Ltd. (Singapore).

Principal Competitors

Ishikawajima-Harima Heavy Industries Co., Ltd.; Kawasaki Heavy Industries, Ltd.; Mitsui Group; NKK Corporation.

Further Reading

Airbus and the Japanese, New York Times, November 21, 1991.

Bates, Daniel, Systems Modeling in Distribution Pact with Tokyo Goliath, Pittsburgh Business Times & Journal, March 9, 1991.

Blustein, Paul, High-Techs Global Links: Industrys Huge Costs Unite Former Rivals, Washington Post, July 16, 1992.

Chida, Tomohei, and Peter N. Davies, The Japanese Shipping and Shipbuilding Industries: A History of Their Modern Growth, London: Athlone Press, 1990.

Kanabayashi, Masayoshi, Ship Firms That Diversify Win Favor of Analysts, Asian Wall Street Journal, June 6, 1995.

Lamke, Kenneth, Miller Park Is Just One of Mitsubishis Problems, Milwaukee Journal Sentinel, October 30, 1999.

Lubar, Robert, The Japanese Giant That Wouldnt Stay Dead, Fortune, November 1964.

Mitsubishi: A Japanese Giants Plans for Growth in the U.S., Business Week, July 20, 1981.

Mitsubishi Heavy Industries Ltd., Oil and Gas Journal, November 23, 1992.

Mitsubishi Heavy Industries Pact, Wall Street Journal, November 2, 1992.

Mitsubishi Heavy Now Expects Deeper FY Group Net Loss, Dow Jones International News, March 28, 2001.

Mitsubishi: The Diamonds Lose Their Sparkle, Economist, May 9, 1998.

Nishioka Named President of Mitsubishi Heavy Industries, Japan Weekly Monitor, April 5, 1999.

Smith, Maurice, A Touch of the Mitsubishis (Mitsubishi Heavy Industries), Accountants Magazine, January, 1991.

Tindall, Robert E., Mitsubishi Group: Worlds Largest Multinational Enterprise?, MSU Business Topics, Spring 1974.

Westinghouse Electric Corp., Wall Street Journal, March 24, 1992.

Wray, William D., Mitsubishi and the N.Y.K., 18701914: Business Strategy in the Japanese Shipping Industry, Cambridge: Harvard University Press, 1984.

Jonathan Martin
updates: Sina Dubovoj, Rebecca Stanfel

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Mitsubishi Heavy Industries, Ltd.

Mitsubishi Heavy Industries, Ltd.

5-1, Marunouchi 2-chome
Chiyoda-ku, Tokyo 100
Japan
(03) 3212-3111
Fax: (03) 3201-6258

Public Company
Incorporated: 1964
Employees: 45,000
Sales: ¥2.6 trillion (US$21.7 billion)
Stock Exchanges: Tokyo Osaka Nagoya Kyoto Hiroshima Fukuoka Niigata Sapporo
SICs: 3731 Ship Building & Repairing; 3721 Aircraft

Since the 1880s the diversified collection of industrial manufacturers now known as Mitsubishi Heavy Industries (MHI) has constituted the heart of the vast Mitsubishi group. Essentially all of Mitsubishis many industrial offspring were developed as adjuncts to its shipbuilding business, begun in 1884. After suffering several dissolutions in the 20th century, MHI reemerged in 1964 as the worlds leading shipbuilder and a powerful competitor in several related engineering fields. Since the disastrous mid-1970s slump in shippingcaused principally by the OPEC oil crisisMHI has accelerated its investment in other fields and reduced shipbuilding to a comparatively minor 11 percent of sales. Its heavy-machinery, power-plant, and construction-equipment divisions are all larger than the original shipbuilding business. With the addition of aircraft production, rocket design, and countless other engineering projects, MHI ranks as one of the worlds foremost heavy industrial manufacturers.

The Mitsubishi interest in shipping and shipbuilding extends back to the groups founding in 19th-century Japan. Yátaro Iwasaki, born in 1834 to a rural samurai family, early in his life became an official with the Kaiseken, the agency responsible for regulating trade in his native Tosa domain, on the island of Shikoku. By adroitly straddling the roles of public official and private entrepreneur, Iwasaki was able to start a small shipping company in the late 1860s. In 1875 the Japanese government gave Iwasaki the 13 steamships that he had operated on its behalf during a brief military engagement with Formosa, making his newly named Mitsubishi Shokaior Three-Diamond Company, the source of the firms logothe dominant shipping agent in Japan.

With extensive mining interests and a talent for currency speculation, Iwasaki became so successful that the government created a rival shipping firm, the KUK, to foster competitive pricing. After a short fare war that threatened the ruin of both firms, Mitsubishis shipping assets were merged with those of the KUK in 1885 to form a single, state-sponsored company. Mitsubishi retained a small amount of stock and exercised some control in the new firm, but its interest shifted to land-based industries, in particular mining and shipbuilding. In 1884, unable to make a go of shipbuilding, the Japanese government had loaned and then transferred outright its two leading shipyards to the private sector. Mitsubishi took control of the best of these, located in Nagasaki, and became Japans premier builder of ships and the only one capable of competing in the international marketplace.

Japans shipbuilding industry was still relatively primitive, however, and remained so until the 1896 Shipbuilding Promotion Law combined with the Sino-Japanese War to spur domestic demand. Mitsubishi, by this time known as Mitsubishi Goshi Kaisha, became the favorite supplier of large ocean-going vessels to the state shipping company NYK, building 43 percent of all ships ordered between 1896 and World War I. Despite the close ties between the two companies, it appears that Mitsubishi did not receive preferential treatment. Indeed, although Mitsubishi gained fame in 1898 as the supplier of Japans first oceangoing steamshipthe 6,000-ton Hitachi Maruits delivery was so tardy that the NYK awarded a second, similar contract to a British firm.

From 1896 through 1904, the eight years between Japans wars with China and Russia, Mitsubishis shipbuilding business increased by nearly 300 percent. In 1905 it acquired a second dockyard, in Kobe, and by 1911 employed some 11,000 workers at Nagasaki alone. Mitsubishis shipbuilding division was not yet especially profitablea disproportionate amount of the parent companys profits still came from mining and stock dividendsbut it soon gave rise to a panoply of subordinate industries that supplied the yards with raw materials and parts. For example, in 1905 the Kobe yard spawned what would eventually become Mitsubishi Electric Corporation, a leading manufacturer of generators and electric appliances. Other shipbuilding divisions grew into power plants and independent producers of airplanes, automobiles, and heavy equipment. Bolstered by its highly profitable mining interests, Mitsubishi was able to afford the vast sums of money and years of work required to transform its subsidiaries into world leaders.

When World War I began in 1914, Japanese shipping lines were unable to procure a sufficient number of foreign ships to maintain their booming business, and so turned to local manufacturers such as Mitsubishi. Japanese production increased more than tenfold between 1914 and 1919, with Mitsubishi leading the field. So great was the surge in business that the Iwasaki family, still in control of Mitsubishi Goshi Kaishathe groups holding companydecided to spin off a number of its leading divisions into separate, publicly held companies, thereby gaining access to outside capital without substantially weakening the companys dominant position. In 1917 the Mitsubishi Shipbuilding building Company (MSC) was created, along with Mitsubishi Bank, Ltd., Mitsubishi Iron Works, and a trading company for the entire group, now called Mitsubishi Corporation. The major components of the Mitsubishi zaibatsu, or conglomerate, were thus in place by 1920, although the ensuing years would bring many modifications to its structure.

As is generally the case, the wartime buildup in ship orders was followed by a severe depression. As business declined below prewar levels many shipbuilders were bankrupted and all were forced to make drastic layoffs. The slump continued throughout the 1920s, merging into the Great Depression. Mitsubishis lack of shipbuilding contracts continued until the beginning of World War II. In the meantime, however, MSC was actively pursuing a number of other technological developments, most notably the airplane and the automobile. Having made its first airplane in 1916 and first auto in the following year, MSC grouped these products under the name Mitsubishi Internal Combustion Engine Manufacturing Company in 1920. This offshoot went through several changes before taking the name of Mitsubishi Aircraft Company in 1928, at which time it was already one of Japans leading manufacturers of military aircraft. After six years of independence, however, the aircraft and automobile facilities were once again united with MSC to form Mitsubishi Heavy Industries in 1934. It is not clear why this strategy was adopted, but the imminent prospect of war with China may have suggested the need for a more unified industrial force.

To stimulate the moribund shipping industry, the Japanese government instituted the Scrap and Build Scheme in 1932. This policy called for shipowners, aided by government subsidies, to replace their older vessels with a smaller number of new, more efficient ships. In this way Japans excess capacity could be reduced while simultaneously modernizing its fleet and promoting new shipbuilding technology. As the leading Japanese builder, Mitsubishi Heavy Industries (MHI) greatly benefited from this program, and even more so from the programs successor, the 1937 Superior Shipbuilding Promotion Scheme. This campaign was clearly prompted by Japans preparations for war, as it subsidized the construction of large cargo ships with an eye to their eventual use for the transportation of troops and supplies. In the years following, government intervention in shipbuilding escalated to outright control, as the Imperial Navy placed all dockyard facilities under its direct command in 1942. The MHI yards at Nagasaki and Kobe produced a wide range of government warships, including the worlds largest battleship, the Musashi. In addition, MHI used its aircraft experience to build 4,000 bombers and some 14,000 of the famous Zero fighters, widely recognized as the finest flying machine in the Pacific during the wars early years. The Zero provided an early example of the cost efficiency and quality that marked Japanese industrial design. A lightweight machine, the Zero could be produced quickly and economically, yet it boasted superior acrobatic abilities and heavy firing power. The Zero made Mitsubishi infamous in the West, discouraging postwar marketers of other Mitsubishi products from highlighting the company name in advertising.

At the end of the war in 1945, an estimated 80 percent of Japans shipyards were still in usable condition. Mitsubishis main yard at Nagasaki, however, did not escape the effects of the worlds second atomic explosion. At wars end the occupying Allied forces halted all shipbuilding activity, restricting the heart of Japans industrial economy. During the two years in which this ban remained in effect, MHI kept busy by repairing damaged vessels and even using its massive plants for the manufacture of furniture and kitchen utensils.

With the growing realization that Japan could be a strategic asset in the postwar battle against Asian communism, the Allies relaxed the more stringent limitations, and many Japanese companies resumed production. For MHI, occupation forces waited until 1950 to chop its mighty assets into three distinct and geographically separated firms: West Japan Heavy Industries, Central Japan Heavy Industries, and East Japan Heavy Industries. Part of an effort to destroy the Mitsubishi zaibatsu as a recognizable entity, the division of MHI was intended to force the three companies to compete against each other for contracts, thus hindering their growth.

The rest of the Mitsubishi group was similarly fragmented, and although it gradually reassumed its former shape, the Iwasaki family no longer controlled the various subsidiaries by means of a single holding company. Instead, each of the major Mitsubishi companies acquired stock in its fellow companies, and a triumvirate composed of the former MHI companies, Mitsubishi Bank, and the groups trading company became the unofficial head of what remained a voluntary economic entity. It is remarkable that this loosely connected portfolio of war-ravaged corporations should then have proceeded to outperform its global competitors over the next few decades. The three heavy-industry companies, in particular, faced an almost impossible situation. Forced to compete with one another, forbidden from pursuing the military contracts that had formerly provided a huge portion of its business, and confronted by international competitors whose technological progress had not been interrupted by the war, the new MHI trio appeared destined for failure.

Several factors combined to help MHI get past this critical period. The 1947 Programmed Shipbuilding Scheme provided low-interest government loans to the shipping companies that needed but could not afford new vessels. In effect, the government decided which ships should be built and helped pay for them, injecting the capital needed to restart a business cycle that had nearly ground to a halt. Secondly, the three companies were able to use some of their idle aircraft facilities in the manufacture of motor scooters and automobiles. Under the direction of the head designer of the Zero, Kubo Tomyo, the rejuvenated auto division sold about 500,000 scooters before the government asked it to resume making small autos in 1959. Thirdly, Japans shipbuilders realized that the Japanese economy depended on ships and their manufacture, and that if Japanese ship producers could not compete in the postwar international market the entire nation would suffer.

Driven by such a threat to its existence, the former MHI companies hired an increasing number of highly competent engineering graduates from Japans leading universities and set them to work emulating the advanced technology of the United States and Western European countries. Able to rely on trade unions that were loyal and flexible in the extreme, they were soon producing ocean-going vessels equal in quality to but less expensive than anything made in the West. The Korean War of 1951 to 1953 triggered a huge increase in orders and, after surviving the short depression following the Korean War, the companies were able to exploit the rapidly developing worldwide demand for oil tankers. The tanker market was in turn given a tremendous jolt by the Suez Canal crisis of 1956, since the canal closing sparked a surge of orders for larger, more efficient ships able to complete the long journey around Africa. Between 1954 and 1956 total orders at Japanese builders more than tripled to 2.9 million gross tons, of which at least two-thirds were placed by foreign shipping companies.

The post-Suez depression in shipbuilding was severe enough to prompt fresh diversification at MHI. Increased research financing was devoted to civil engineering, plant construction, and automobiles, all of which MHFs years of experience in heavy industry had well prepared it to undertake. In 1958, in cooperation with 23 other Mitsubishi Group corporations, Mitsubishi Heavy Industries created Mitsubishi Atomic Power Industries. MHI continues to dominate contemporary Japanese production of atomic power. Automobile production rose steadily, if not as quickly as at rivals Toyota and Nissan, and by 1964 the Nagoya plants were manufacturing 4,000 cars per month. Even aircraft production had been resumed by the early 1960s.

With the world increasingly dependent on imported oil and Japans construction skills honed to perfection, Mitsubishi was hit by an avalanche of orders for tankers during the 1960s and early 1970s. To accommodate this extraordinary boom, the three parts of MHI were once again united, resulting in the 1964 rebirth of Mitsubishi Heavy Industries. This giants 77,000 employees and $700 million in sales were spread among a handful of the most important heavy industries, but shipbuilding utilized the bulk of MHFs resources. A new dock with 300,000-gross-ton capacity was built at Nagasaki in 1965, followed by the 1972 completion of a mammoth 1-million-gross-ton supertanker facility at the same yard. This ultra-efficient dock enjoyed only a short life, howeverthe oil crisis of 1973 and 1974 soon brought tanker orders to a near standstill, permanently crippling the entire Japanese shipbuilding industry.

The economic downturn was devastating. By 1975, the last of the peak tanker years, 40 percent of MHI sales and one-third of its workers were involved in shipbuilding. By 1985 those numbers were 15 percent and 17 percent, respectively, and they have since continued to decline. Once again, the Japanese were confronted with a catastrophic loss of business, but MHI managed to shift its assets quickly enough to survive. Having already spun off its automobile division to form Mitsubishi Motors Corporation in 1970, MHI aggressively pursued clients in the power-plant and factory-design fields. It also resumed its position as the top supplier of military hardware to Japans growing defense force. MHI has streamlined its production facilities by shifting employees from older industries such as shipbuilding to newer ones such as machinery and power-plant production, at the same time allowing natural attrition to shrink its overall labor bill.

The result is a very diversified company. Mitsubishi Motors is no longer a consolidated subsidiary of its parent. In 1990 MHI owned less than 26 percent of the automakers stock. Given MHIs traditionally poor marketing and consumer sales skills this separation will likely prove a boon for each company.

MHI eventually emerged successfully from the disastrous downturn of the shipbuilding industry, and has become Japans industrial leader in other areas as well. While there were minor sales losses during the weakening of the global economy in the early 1990s, MHIs diversified manufacturing interests quickly rebounded. On the eve of the 21st century, MHI is Japans largest, most important, manufacturing concern.

At present, MHI consists of five principal divisions, with associated branches and joint ventures worldwide: shipbuilding and steel structures; power generation equipment and facilities; heavy machinery; aerospace and defense; general (multifunction) machinery and air conditioners.

The shipbuilding and steel structures manufacturing segment presently accounts for approximately 14 percent of MHIs sales, a figure likely to increase significantly. MHI is Japans leading shipbuilder, while shipbuilding (passenger, merchant, naval vessels) accounts for approximately 65 percent of sales for this division. One reason for MHIs successful recovery from the severe downturn in the shipbuilding recession is the companys transfer of thousands of highly skilled shipbuilding workers to other MHI divisions; when shipbuilding orders began to increase in the 1980s, these workers were shifted back to shipbuilding. Hence MHI does not suffer from the quandary of other leading shipbuilding industries in Japan and elsewhere: a severe shortage of skilled labor. The outlook for shipbuilding remains highly positive, in large part because of the need to overhaul the worlds leaky oil tankers and other aged and increasingly unsafe and inefficient merchant vessels. In addition, MHI is the world leader in liquid natural gas carriers, which could emerge as the dominant fuel-powered vessel of the future.

MHI has also benefited from the Japanese governments commitment in the 1990s to engage in massive public works projects such as building and repairing roads, bridges, tunnels, smokestacks, and parking and leisure facilities. The steel structures industry of MHI, formerly a drag on the company, is growing and likely to expand into the next century.

MHIs power generation division is extremely strong and likely to remain so. Accounting for approximately 27 percent of sales, the divisions principal customers are utility companies. Major products manufactured by this division include low-polluting, large gas turbines, electric power boilers, diesel engines, and nuclear power equipment. With the rise of the standard of living in southeast Asia overall, MHI sales in this division are expected to increase. In Japan, the shift to nuclear power continues, with the consequent growth in demand for nuclear power equipment. MHI is a leading company in developing alternative power technologies and in coal gasification techniques.

One MHI division that has not fared especially well has been heavy machinery. Most of the sales of this division (24 percent of total MHI sales) for years were centered on printing machinery. Demand for paper and pulp products has been stagnant for many years. The division, as a result, has been forging ahead in the development of environmental equipment, especially garbage incinerators, flue gas treatment products (to reduce noxious emissions in the atmosphere), and in gas engineering. MHI hopes that this division, mired in a perennial slump, improves its performance in the future.

Twenty-one percent of MHFs sales derive from its aircraft/ defense component business. Although sales of defense-related equipment have slowed, MHI remains Japans largest manufacturer and marketer of civil aircraft. Lastly, the general machinery/air conditioning segment accounts for 14 percent of company sales revenues. While sales of forklifts and construction machinery are stagnant, demand for air-conditioning equipment is growing, even in the depressed car manufacturing sector. Currently, air conditioning constitutes 57 percent of sales in this division.

MHFs five well-integrated manufacturing sectors, coupled with its attention to new technologies, have enabled the company to ensure that its major business segments remain growth industries. Nearly half of MHFs sales derive from its international markets, reflecting its reliance on a customer base that is worldwide.

Principal Subsidiaries

Mitsubishi Heavy Industries America, Inc. (U.S.A.); MHI Corrugating Machinery Company (U.S.A.); Mitsubishi Engine North America, Inc. (U.S.A.); MHI Forklift America, Inc. (U.S.A.); Bocar-MHI S.A. de C.V. (Mexico); Mitsubishi Brasileira de Industria Pesada Ltda. (Brazil); CBC Industrias Pesadas S.A. (Brazil); ATA Combustao Técnica S.A. (Brazil); Mitsubishi Heavy Industries Europe, Ltd. (U.K.); MHI Equipment Europe B.V. (Netherlands); Saudi Factory for Electrical Appliances Company, Ltd. (Saudi Arabia); Bohai & MHI Platform Engineering Co., Ltd. (China); Mitsubishi Heavy Industries (Hong Kong) Ltd.; MHI-Mahajak Air-Conditioners Co., Ltd. (Thailand); Thai Compressor Manufacturing Co., Ltd. (Thailand); Highway Toll Systems Sdn. Bhd. (Malaysia); MHI South East Asia Pte. Ltd. (Singapore).

Further Reading

Lubar, Robert, The Japanese Giant That Wouldnt Stay Dead, Fortune, November 1964; Tindall, Robert E., Mitsubishi Group: Worlds Largest Multinational Enterprise?, MSU Business Topics, Spring 1974; Mitsubishi: A Japanese Giants Plans for Growth in the U.S., Business Week, July 20, 1981; Wray, William D., Mitsubishi and the N.Y.K., 1870-1914: Business Strategy in the Japanese Shipping Industry, Cambridge, Harvard University Press, 1984; Chida, Tomohei, and Peter N. Davies, The Japanese Shipping and Shipbuilding Industries: A History of Their Modern Growth, London, The Athlone Press, 1990; Smith, Maurice, A Touch of the Mitsubishis (Mitsubishi Heavy Industries), The Accountants Magazine, January, 1991; Bates, Daniel, Systems Modeling in Distribution Pact with Tokyo Goliath, Pittsburgh Business Times & Journal, March 9, 1991; Airbus and the Japanese, New York Times, November 21, 1991; Westing-house Electric Corp., Wall Street Journal, March 24, 1992; Blustein, Paul, High-Techs Global Links: Industrys Huge Costs Unite Former Rivals, Washington Post, July 16, 1992; Mitsubishi Heavy Industries Pact, Wall Street Journal, November 2, 1992; Mitsubishi Heavy Industries Ltd., The Oil and Gas Journal, November 23, 1992.

Jonathan Martin

updated by Sina Dubovoj

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Mitsubishi Heavy Industries, Ltd.

Mitsubishi Heavy Industries, Ltd.

5-1, Marunouchi 2-chome
Chiyoda-ku, Tokyo 100
Japan
(03) 3212-3111
Fax: (03) 3201-6258

Public Company
Incorporated: 1964
Employees: 44,392
Sales: ¥1.89 trillion (US$13.15 billion)
Stock Exchanges: Tokyo Osaka Nagoya Kyoto Hiroshima Fukuoka Niigata Sapporo

Since the 1880s the diversified collection of industrial manufacturers now known as Mitsubishi Heavy Industries (MHI) has constituted the heart of the vast Mitsubishi group. Essentially all of Mitsubishis many industrial offspring were developed as adjuncts to its shipbuilding business, begun in 1884. After suffering several dissolutions in the 20th century, MHI reemerged in 1964 as the worlds leading shipbuilder and a powerful competitor in half a dozen related engineering fields. Since the disastrous mid-1970s slump in shipping, caused principally by the OPEC oil crisis, MHI has accelerated its investment in other fields and reduced shipbuilding to a comparatively minor 11% of sales. Its heavy-machinery, power-plant, and construction-equipment divisions are all larger than the original shipbuilding business. With the addition of aircraft production, rocket design, and countless other engineering projects, MHI ranks as one of the worlds foremost heavy industrial manufacturers.

The Mitsubishi interest in shipping and shipbuilding extends back to the groups founding in 19th-century Japan. Yataro Iwasaki, born in 1834 to a rural samurai family, early in his life became an official with the Kaiseken, the agency responsible for regulating trade in his native Tosa domain, on the island of Shikoku. By adroitly straddling the roles of public official and private entrepreneur, Iwasaki was able to start a small shipping company in the late 1860s. In 1875 the Japanese government gave Iwasaki the 13 steamships which he had operated on its behalf during a brief military engagement with Formosa, making his newly named Mitsubishi Shokai or Three-Diamond Company, the source of the firms logo the dominant shipping agent in Japan.

With extensive mining interests and a talent for currency speculation, Iwasaki became so successful that the government created a rival shipping firm, the KUK, to foster competitive pricing. After a short fare war that threatened the ruin of both firms, Mitsubishis shipping assets were merged with those of the KUK, in 1885, to form a single, state-sponsored company. Mitsubishi retained a small amount of stock and exercised some control in the new firm, but its interest shifted to land-based industries, in particular mining and shipbuilding. In 1884, unable to make a go of shipbuilding, the Japanese government had loaned and then transferred outright its two leading shipyards to the private sector. Mitsubishi took control of the best of these, which was located in Nagasaki, becoming Japans premier builder of ships and the only one capable to competing in the international marketplace.

Japans shipbuilding industry was still relatively primitive, however, and remained so until the 1896 Shipbuilding Promotion Law combined with the Sino-Japanese War to spur domestic demand. Mitsubishi, by this time known as Mitsubishi Goshi Kaisha, became the favorite supplier of large oceangoing vessels to the state shipping company NYK, building 43% of all ships ordered between 1896 and World War I. Despite the close ties between the two companies, it appears that Mitsubishi did not receive preferential treatment. Indeed, although Mitsubishi gained fame in 1898 as the supplier of Japans first ocean-going steamshipthe 6,000-ton Hitachi Maru its delivery was so tardy that the NYK awarded a second, similar contract to a British firm.

From 1896 through 1904, the eight years between Japans wars with China and Russia, Mitsubishis shipbuilding business increased by nearly 300%. In 1905 it acquired a second dockyard, in Kobe, and by 1911 employed some 11,000 workers at Nagasaki alone. Mitsubishis shipbuilding division was not yet especially profitablea disproportionate amount of the parent companys profit still came from mining and stock dividendsbut it soon gave rise to a panoply of subordinate industries which supplied the yards with raw materials and parts. For example, in 1905 the Kobe yard spawned what would eventually become Mitsubishi Electric Company, a leading manufacturer of generators and electric appliances. Other shipbuilding divisions grew into power plants and independent producers of airplanes, automobiles, and heavy equipment. Bolstered by its highly profitable mining interests, Mitsubishi could afford the vast sums of money and years of work required to transform its subsidiaries into world leaders.

When World War I began in 1914, Japanese shipping lines were unable to procure enough foreign ships to maintain their booming business, and so turned to local manufacturers like Mitsubishi. Overall Japanese production increased more than tenfold between 1914 and 1919, with Mitsubishi leading the field. So great was the surge in business that the Iwasaki family, still in control of Mitsubishi Goshi Kaishathe groups holding companydecided to spin off a number of its leading divisions into separate, publicly held companies, thereby gaining access to outside capital without substantially weakening the companys dominant position. In 1917 the Mitsubishi Shipbuilding Company (MSC) was created, along with Mitsubishi Bank; Mitsubishi Iron Works; and a trading company for the entire group, now called Mitsubishi Corporation. The major components of the Mitsubishi zaibatsu, or conglomerate, were thus in place by 1920, although the ensuing years would bring many modifications to its structure.

As is generally the case, the wartime build-up in ship orders was followed by a severe depression. As business declined below prewar levels many shipbuilders were bankrupted and all were forced to make drastic lay-offs. The slump continued throughout the 1920s, merging into the Great Depression; Mitsubishis lack of shipbuilding contracts continued until the beginning of World War II. In the meantime, however, MSC was actively pursuing a number of other technological developments, most notably the airplane and the automobile. Having made its first airplane in 1916 and first auto in the following year, MSC grouped these products under Mitsubishi Internal Combustion Engine Manufacturing Company, in 1920. This offshoot went through several changes before taking the name of Mitsubishi Aircraft Company, in 1928, at which time it was already one of Japans leading manufacturers of military aircraft. After six years of independence, however, the aircraft and automobile facilities were once again united with MSC to form Mitsubishi Heavy Industries, in 1934. It is not clear why this strategy was adopted, but the imminent prospect of war with China may have suggested the need for a more unified industrial force.

To stimulate the moribund shipping industry, the Japanese government, in 1932, instituted the Scrap and Build Scheme. This policy called for shipowners, aided by government subsidies, to replace their older, smaller vessels with fewer new, more efficient ships. In this way Japans excess capacity could be reduced while simultaneously modernizing its fleet and promoting new shipbuilding technology. As the leading Japanese builder, Mitsubishi Heavy Industries (MHI) greatly benefited from this program, and even more so from the programs successor, the 1937 Superior Shipbuilding Promotion Scheme. This campaign was clearly prompted by Japans preparations for war, as it subsidized the construction of very-large cargo ships with an eye to their eventual use for the transportation of troops and supplies. In the years following, government intervention in shipbuilding escalated to outright control, as the Imperial Navy placed all dockyard facilities under its direct command in 1942. The MHI yards at Nagasaki and Kobe produced a wide range of government warships, including the worlds largest battleship, the Musashi. In addition, MHI used its aircraft experience to build 4,000 bombers and some 14,000 of the famous Zero fighters, widely recognized as the finest flying machine in the Pacific during the wars early years. The Zero provided an early example of the cost efficiency and quality that marked Japanese industrial design. A lightweight machine, the Zero could be produced quickly and economically, yet it boasted superior aerobatic abilities and heavy firing power. The Zero made Mitsubishi infamous in the West, discouraging postwar marketers of other Mitsubishi products from highlighting the company name in advertising.

At the end of the war, in 1945, an estimated 80% of Japans shipyards were still in usable condition. Mitsubishis main yard at Nagasaki, however, did not escape the effects of the worlds second atomic explosion. At wars end the occupying Allied forces halted all shipbuilding activity, restricting the heart of Japans industrial economy. During the two years in which this ban remained in effect, MHI kept busy by repairing damaged vessels and even using its massive plants for the manufacture of furniture and kitchen utensils.

With the growing realization that Japan could be a strategic asset in the postwar battle against Asian communism, the Allies relaxed the more stringent limitations, and many Japanese companies resumed production. For MHI, occupation forces waited until 1950 to chop its mighty assets into three distinct and geographically separated firms: West Japan Heavy Industries, Central Japan Heavy Industries, and East Japan Heavy Industries. Part of an effort to destroy the Mitsubishi zaibatsu as a recognizable entity, the division of MHI was intended to force the three companies to compete against each other for contracts, and hinder their growth.

The rest of the Mitsubishi group was similarly fragmented, and although it gradually reassumed its former shape, the Iwasaki family no longer controlled the various subsidiaries by means of a single holding company. Instead, each of the major Mitsubishi companies acquired stock in its fellow companies, and a triumvirate composed of the former MHI companies, Mitsubishi Bank, and the groups trading company became the unofficial head of what remained a voluntary economic entity. It is remarkable that this loosely connected portfolio of war-ravaged corporations should then have proceeded to outperform its global competitors over the next few decades. The three heavy-industries companies, in particular, faced an almost impossible situation. Forced to compete with one another, forbidden from pursuing the military contracts which had formerly provided a huge portion of its business, and confronted by international competitors whose technological progress had not been interrupted by the war, the new MHI trio appeared destined for failure.

Several factors combined to help MHI get past this critical period. The 1947 Programmed Shipbuilding Scheme provided low-interest government loans to the shipping companies which needed but could not afford new vessels. In effect, the government decided which ships should be built and helped pay for them, injecting the capital needed to restart a business cycle that nearly had ground to a halt. Secondly, the three companies were able to use some of their idle aircraft facilities in the manufacture of motor scooters and automobiles. Under the direction of head designer of the Zero, Kubo Tomyo, the rejuvenated auto division sold about 500,000 scooters before the government asked it to resume making small autos in 1959. Thirdly, Japans shipbuilders realized that the Japanese economy depended on ships and their manufacture, and that if Japanese ship producers could not compete in the postwar international market the entire nation would suffer.

Driven by such a threat to its existence, the former MHI companies hired an increasing number of highly competent engineering graduates from Japans leading universities and set them to work emulating the advanced technology of the United States and Western European countries. Able to rely on trade unions which were loyal and flexible in the extreme, they were soon producing ocean-going vessels equal in quality to but less expensive than anything made in the West. The Korean War of 1951 to 1953 provided a huge increase in orders, and after surviving the short depression following the Korean War, the companies were able to exploit the rapidly developing worldwide demand for oil tankers. The tanker market was in turn given a tremendous jolt by the Suez Canal crisis of 1956, since the canal closing sparked a surge of orders for larger, more efficient ships able to complete the long journey around Africa. Between 1954 and 1956, total orders at Japanese builders more than tripled to 2.9 million gross tons, of which at least two-thirds were placed by foreign shipping companies.

The post-Suez depression in shipbuilding was severe enough to prompt fresh diversification at MHI. Increased research financing was devoted to civil engineering, plant construction, and automobiles, all of which MHIs years of experience in heavy industry had well prepared it to undertake. In 1958, in cooperation with 23 other Mitsubishi Group corporations, Mitsubishi Heavy Industries created Mitsubishi Atomic Power Industries. MHI continues to dominate contemporary Japanese production of atomic power. Automobile production rose steadily, if not as quickly as at rivals Toyota and Nissan, and by 1964 the Nagoya plants were manufacturing 4,000 cars per month. Even aircraft production had been resumed by the early 1960s.

With the world increasingly dependent on imported oil, and Japans construction skills honed to perfection, Mitsubishi was hit by an avalanche of orders for tankers during the 1960s and early 1970s. To accommodate this extraordinary boom, the three parts of MHI were once again united, resulting in the 1964 rebirth of Mitsubishi Heavy Industries. This giants 77,000 employees and $700 million in sales were spread among a handful of the most important heavy industries, but shipbuilding utilized the bulk of MHIs resources. A new dock with 300,000-gross-ton capacity was built at Nagasaki in 1965, followed by the 1972 completion of a mammoth 1-million-gross-ton supertanker facility at the same yard. This ultra-efficient dock enjoyed only a short life, howeverthe oil crisis of 1973 and 1974 soon brought tanker orders to a near standstill, permanently crippling the entire Japanese shipbuilding industry.

The downturn was devastating. By 1975, the last of the peak tanker years, 40% of MHI sales and one-third of its workers were involved in shipbuilding. By 1985 those numbers were 15% and 17%, respectively, and they have since continued to decline. Once again, the Japanese were confronted with a catastrophic loss of business, but MHI managed to shift its assets fast enough to survive. Having already spun off its automobile division to form Mitsubishi Motors Corporation in 1970, MHI aggressively pursued clients in the power-plant and factory-design fields. It also resumed its position as the top supplier of military hardware to Japans growing defense force. MHI has streamlined its production facilities by shifting employees from older industries like shipbuilding to newer ones such as machinery and powerplant production, at the same time allowing natural attrition to shrink its overall labor bill.

The result is a more diversified MHI than ever before. The companys sales are generated by a continually increasing number of activities, with the power-plant and machinery division responsible for 71% of the corporate total. Mitsubishi Motors is no longer a consolidated subsidiary of its parent. In 1990 MHI owned less than 26% of the automakers stock. Given MHIs traditionally poor marketing and consumer sales skills this separation will likely prove a boon for each company. In 1989 shipbuilding accounted for only 11.4% of total sales, a figure which highlights MHIs remarkably adaptive postwar history. Not only did the company rise from the rubble of postwar Japan to become the worlds leading shipbuilder, it even more miraculously survived the sudden and near-total destruction of that market in the 1970s.

Principal Subsidiaries

Mitsubishi Heavy Industries America, Inc. (U.S.A.); MHI Corrugating Machinery Company (U.S.A.); Mitsubishi Engine North America, Inc. (U.S.A.); MHI Forklift America, Inc. (U.S.A.); Bocar-MHI S.A. de C.V. (Mexico); Mitsubishi Brasileira de Industria Pesada Ltda. (Brazil); CBC Indüstrias Pesadas S.A. (Brazil); ATA Combustão Técnica S.A. (Brazil); Mitsubishi Heavy Industries Europe, Ltd. (U.K.); MHI Equipment Europe B.V. (Netherlands); Saudi Factory for Electrical Appliances Company, Ltd. (Saudi Arabia); Bohai & MHI Platform Engineering Co., Ltd. (China); Mitsubishi Heavy Industries (Hong Kong) Ltd.; MHI-Mahajak Air-Conditioners Co., Ltd. (Thailand); Thai Compressor Manufacturing Co., Ltd. (Thailand); Highway Toll Systems Sdn. Bhd. (Malaysia); MHI South East Asia Pte. Ltd. (Singapore).

Further Reading

Lubar, Robert, The Japanese Giant That Wouldnt Stay Dead, Fortune, November 1964; Tindall, Robert E., Mitsubishi Group: Worlds Largest Multinational Enterprise?, MSU Business Topics, Spring 1974; Mitsubishi: A Japanese giants plans for growth in the U.S., Business Week, July 20, 1981; Wray, William D., Mitsubishi and the N.Y.K., 1870-1914: Business Strategy in the Japanese Shipping Industry, Cambridge, Harvard University Press, 1984; Chida, Tomohei, and Peter N. Davies, The Japanese Shipping and Shipbuilding Industries: A History of Their Modern Growth, London, The Athlone Press, 1990.

Jonathan Martin

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"Mitsubishi Heavy Industries, Ltd.." International Directory of Company Histories. . Encyclopedia.com. (October 18, 2017). http://www.encyclopedia.com/books/politics-and-business-magazines/mitsubishi-heavy-industries-ltd-1

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