Subject: [cwj 12] Family ties fray within Mitsubishi group
From: Corporate Watch in Japanese <>
Date: Tue, 09 May 2000 17:33:36 -0700
Seq: 12

May 8, 2000
Nikkei Weekly

Family ties fray within Mitsubishi group

Self-interest comes first as companies fight each other for position in
international aerospace business

Staff writer

The Mitsubishi group is on the verge of a family feud. Group companies are
stepping into each other's territory, tempers are rising and no one is
particularly sentimental about the good old days.

Mitsubishi Heavy Industries Ltd. and Mitsubishi Electric Corp. have been
strengthening ties with Boeing Co. of the U.S. to boost their aerospace
businesses, but they seem to be motivated by a desire for individual gain,
not for the benefit of the Mitsubishi group as a whole. Meanwhile, trading
house Mitsubishi Corp. has been supporting Ishikawajima-Harima Heavy
Industries Co. in its bid to expand its satellite-launch business.

Family tensions came to the surface on April 28, when Ichiro Taniguchi,
president of Mitsubishi Electric, held a joint press conference with Boeing
in Tokyo. "We are the ones who will provide new satellites when requested.
There will be no competition with Mitsubishi Heavy Industries," Taniguchi
said in a rather agitated tone when asked if his company's joint project
with Boeing would cause any conflict with Mitsubishi Heavy Industries. 

Mitsubishi Electric will join a Boeing-led project to develop an in-flight
telecommunications system for aircraft. The system would allow passengers
on board to access the Internet via satellites. Under the agreement,
Mitsubishi Electric will jointly develop an antenna for airplanes and other
equipment, and start operating the system by the end of 2001. Japan's
largest satellite manufacturer sees the success of the in-flight
telecommunications system creating growing demand for its satellite
business, company officials said. 

Taniguchi's agitated tone gave further credence to a report that he was
upset when he heard that Mitsubishi Heavy Industries' Boeing deal,
reportedly agreed to in early April, covers the joint development of

As someone who built his career in the aerospace industry, Taniguchi is
said to have felt that Mitsubishi Heavy Industries' plans were an invasion
of his turf. That Mitsubishi Heavy Industries allegedly went ahead with the
signing of the agreement without giving any notice to Mitsubishi Electric
is also said to have added to the company's bitterness.

For Mitsubishi Heavy Industries, however, its alliance with Boeing should
be a key to recovering from a business slump. The company is believed to
have plunged into the red in fiscal 1999 for the first time since 1964,
when it was created through a merger.

Takashi Nishioka, president of Mitsubishi Heavy Industries, is heading the
negotiations with Boeing. Nishioka rose to his position from the company's
aerospace division. The fact that the president is directly involved in
negotiations shows how much emphasis the company is putting on them.

Though Mitsubishi Heavy Industries executives are careful about what they
say for attribution, a high-ranking executive who requested anonymity said
Mitsubishi Electric has no right to be mad about its talks with Boeing,
because Mitsubishi Electric signed a comprehensive business agreement in
1998 with Lockheed Martin Corp. of the U.S. without first consulting
Mitsubishi Heavy.

"We already compete in the market for family-use air conditioners," the
official said. "If we also become rivals in the satellite market, I don't
think it will be much of a problem."

Said Takatoshi Yamamoto, an analyst at Morgan Stanley Dean Witter Japan
Ltd.: "The air-conditioner issue is one of many examples where the business
of both companies overlap. During their happy days, they enjoyed growing
demand to absorb their overlaps."

Both Mitsubishi Heavy and Mitsubishi Electric needed a major alliance to
develop and sustain international operations in the expensive aerospace
business. That they both picked Boeing shows how Mitsubishi's family ties
are fraying.

Another example of those fraying family ties can be found in trading house
Mitsubishi's alliance with Ishikawajima-Harima Heavy Industries (IHI).
Mitsubishi, a major trading company, plans to work with IHI on a
satellite-launching project on Kiritimati, formally known as Christmas
Island, in the small equatorial island republic of Kiribati.

IHI announced on April 10 that it would acquire the aerospace/defense
division of Nissan Motor Co. The company intends to expand into the
satellite launch business by deepening its involvement in the development
of the remodeled J-1 rocket due for launch in 2004.

Mitsubishi is in charge of securing the site for the IHI launch, ensuring
reliability and cutting costs. The space delivery vehicle to be launched
uses Lockheed Martin's Atlas 2 as its first stage booster. The revamped J-1
is a rival of the H-IIA rocket, whose development and launch is led by
Mitsubishi Heavy Industries. 

But Mitsubishi officials seem unmoved by family ties in the aerospace
rivalry. An official from the trading house said the new J-1 is better
suited to commercial use because it is much smaller than the H-IIA.

The divergence in attitudes among Mitsubishi group companies was also seen
during negotiations to get DaimlerChrysler AG to buy into Mitsubishi Motors
Corp. Mitsubishi was in favor of the move; Mitsubishi Heavy Industries was
less supportive.

Takashi Koyama contributed to this article.
Corporate Watch in Japanese
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