TOKYO -- After sinking 12 years and more than 1 trillion yen ($9.55 billion) into the SpaceJet, Mitsubishi Heavy Industries has decided to suspend its project to build Japan's first homegrown passenger plane in decades.
The program launched to fanfare as the Mitsubishi Regional Jet back in 2008 as part of a national campaign to take Japan's aerospace industry to the next level, supported by the public and private sectors alike. The government provided about 50 billion yen in aid.
But Mitsubishi Heavy's insistence on building a domestic jet, despite a lack of experience in the area, tied the company's hands and ultimately led to the effort's downfall -- a cautionary tale for other manufacturers here seeking to enter new fields.
"It is true that we are considering many possibilities," Mitsubishi Heavy said Friday of the program.
Mitsubishi Heavy had once developed the Zero fighter used by Japan in World War II and had considered itself the leader of the nation's aerospace industry. Many in the company had been eager to get back into the game.
"There's some risk, but we'll have a hard time getting into the civilian business [of passenger aircraft] if we miss this opportunity," then-President Kazuo Tsukuda had said.
But Japan's last passenger plane, the YS-11 turboprop, had been discontinued back in 1973, and much know-how had been lost.
Problems emerged almost immediately. While Mitsubishi Heavy was already involved in aerospace, it mostly supplied jet components to such customers as Boeing. Building an aircraft from scratch proved completely different undertaking, and the company struggled to source and manage the roughly 1 million parts involved.
Around the same time, Brazil's Embraer was also developing a new generation of passenger jets. Mitsubishi Heavy, with its army of skilled and highly educated engineers, had been confident about beating its rival to market. But Embraer ultimately won the race, delivering the first of its new jets in 2018.
Embraer was founded in 1969 and privatized in the 1990s. It has succeeded in speeding up its development timeline through a flexible approach to incorporating foreign talent.
Mired in challenges, Mitsubishi Heavy eventually began to follow suit. It recruited numerous engineers from a Canadian rival and elsewhere in 2018. But they have struggled to fit in, partly owing to pride on the part of the existing Japanese team.
Seven years after the original planned delivery date, the SpaceJet still has yet to receive type certification -- a prerequisite for commercial flight. Shipments have been postponed for a sixth time, and the development costs of more than 1 trillion yen have greatly overrun the initially planned 150 billion yen.
Many smaller suppliers, a portion of which entered the aviation industry specifically for the SpaceJet project, have struggled to keep up their operations through the numerous delays. Meanwhile, demand for air travel has plunged in the pandemic.
Mitsubishi Heavy said Friday that it will "continue to closely review the development timeline, taking into account the impact of the coronavirus." The company plans to keep trying for a type certification. But it will cut the program's budget and essentially halve the SpaceJet team to about 500 as early as this fiscal year. The team had already been downsized by half once before.
The company also faces headwinds in core operations. Fossil-fuel-fired power plants, which account for around 60% of group operating profit, are under growing pressure over their environmental impact. Shipbuilding operations face challenges as well. Mitsubishi Heavy has little resources to spend on a project that may not succeed financially.
Investors appeared to support the company's decision on the SpaceJet. At one point Friday, Mitsubishi Heavy shares were up 7% at 2,379 yen on the Tokyo Stock Exchange.