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Aerospace & Defense

Jet delays drag Mitsubishi Heavy toward first loss in 20 years

Aircraft unit's management reshuffled as development costs poised to top $9bn

Mitsubishi Heavy Industries now targets late 2021 for delivery of the SpaceJet, far beyond the original date of 2013. (Photo courtesy of Mitsubishi Aircraft)

TOKYO -- Mitsubishi Heavy Industries on Thursday forecast a 10 billion yen ($91.2 million) pretax loss for the year ending in March as the cost of its delay-plagued business jet project continues to mount with no end in sight.

The earnings downgrade heralds the first annual loss in 20 years for the Japanese industrial group, which also announced its sixth delay in delivering the Mitsubishi SpaceJet.

Development costs are projected to top 1 trillion yen, or $9.12 billion, with the inclusion of a 70-seat model intended for the North American market.

President Seiji Izumisawa, who took the post in 2019, apologized for the difficulties at a news conference.

"Our aim of broadening our business profile with finished aircraft remains unchanged," he said.

The company now expects to begin delivering the jet in late 2021 or 2022, far from its original estimate of 2013. But it remains to be seen whether more customers will cancel their orders, which now call for production of 300 jets.

Mitsubishi Heavy Industries President Seiji Izumisawa attends the company's earnings conference Feb. 6 in Tokyo. (Photo by Yuki Nakao)

A management reshuffle at subsidiary Mitsubishi Aircraft was announced Thursday as well. Takaoki Niwa, now head of Mitsubishi Heavy Industries America, replaces President Hisakazu Mizutani effective April 1.

The aircraft unit will try to turn around the trouble-prone SpaceJet program under its third president in five years. Testing is underway to qualify for a type certificate, a proof of airworthiness. But the plane's design has changed over the years, as has its name, which originally was the Mitsubishi Regional Jet.

Development costs for the current fiscal year are expected to reach 270 billion yen, up 190 billion yen from the prior estimate. Write-downs on the program total 77.8 billion yen for the nine months through December. Both add up to the biggest factor in Mitsubishi Heavy's earnings downgrade.

Because the aircraft program's losses can offset the tax burden on future earnings, Mitsubishi Heavy can book substantial deferred tax assets, which lift its current net profit. The company forecast a 100 billion yen net profit for the year ending in March.

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