August 10, 2017 2:00 am JST  (Updated August 11, 2017 10:42 am JST)
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Mitsubishi Heavy to back out of maglev train project

Earnings slump forcing Japanese manufacturer to review business lines

Central Japan Railway has been testing maglev train prototypes in Yamanashi Prefecture.

TOKYO -- Mitsubishi Heavy Industries, one of Japan's leading engineering companies, will withdraw from a 9 trillion yen ($82 billion) prestigious high-speed railway project as it struggles to deal with ballooning developments costs of its other mainstream projects such as a passenger jet.

Magnetic-levitation, or maglev, is a futuristic technology that allows trains to move without making contact with the ground. The technology allows trains to travel at speeds of up to around 500kph, which is significantly faster than the Shinkansen bullet train's 285kph. Travel time between Tokyo and Nagoya, 286 kilometers apart, will be reduced to just 40 minutes from the current hour and a half. Japan aims to become a world leader in adopting the technology.

Mitsubishi Heavy has participated in the development and production of prototype maglev train cars, which have been tested in Yamanashi Prefecture in central Japan. This was to be the company's first foray into the high-speed rail business and an opportunity to catch up with domestic rivals Hitachi and Kawasaki Heavy Industries in the field.

The main catalyst behind the decision was a disagreement with Central Japan Railway over the cost of manufacturing the maglev train cars. The railway company, which is better known as JR Tokai, is working to launch the Linear Chuo Shinkansen maglev train line in 2027.

However, Tokyo-based Mitsubishi Heavy, which manufactures a wide range of heavy equipment, has become more selective about its operations amid the earnings slump, which has stemmed from delays in development of the Mitsubishi Regional Jet, Japan's first home-grown jetliner, as well as snags in the manufacturing of supersized cruise ships. Under financial pressure, Mitsubishi has been forced to prune its noncore operations.

Construction of the maglev line began in 2014, with the goal of launching the first leg of service, between Tokyo and Nagoya, in 2027. The service is expected to be extended further west to Osaka as early as 2037, at which point travelers should be able to move from Tokyo to Osaka in 67 minutes. Building a maglev line to Osaka is estimated to cost around 9 trillion yen.

Mitsubishi Heavy's withdrawal "won't impact the scheduled opening since we plan to select the manufacturers of commercial-use maglev train cars separately" from those for prototypes, a high-ranking JR Tokai official said.

Superconducting magnets, a key maglev train component, are expected to be supplied by Toshiba and Mitsubishi Electric. Production of the commercial maglev cars likely will be led by Nippon Sharyo, a JR Tokai unit that has been developing prototypes together with Mitsubishi Heavy.

Various Japan Rail group companies are working to export their high-speed railway systems by teaming up with the Japanese government. JR Tokai, for instance, has been pitching a maglev line in the U.S. northeast, with a proposal to start off the line with a link between Washington, D.C., and Baltimore. However, talks have stalled amid the massive projected costs and a lack of clarity on the Trump administration's stance on high-speed rail.

(Nikkei)

Mitsubishi Heavy Industries, Ltd.

Japan

Market(Ticker): TKS(7011)
Sector:
Industry:
Producer Manufacturing
Industrial Machinery
Market cap(USD): 13,153.57M
Shares: 3,373.64M

Central Japan Railway Co.

Japan

Market(Ticker): TKS(9022)
Sector:
Industry:
Transportation
Railroads
Market cap(USD): 34,162.90M
Shares: 206M

Hitachi Ltd.

Japan

Market(Ticker): TKS(6501)
Sector:
Industry:
Producer Manufacturing
Industrial Conglomerates
Market cap(USD): 31,687.97M
Shares: 4,833.46M

Kawasaki Heavy Industries, Ltd.

Japan

Market(Ticker): TKS(7012)
Sector:
Industry:
Producer Manufacturing
Industrial Conglomerates
Market cap(USD): 4,961.14M
Shares: 1,670.80M

Toshiba Corp.

Japan

Market(Ticker): TKS(6502)
Sector:
Industry:
Consumer Durables
Electronics/Appliances
Market cap(USD): 11,626.63M
Shares: 4,237.60M

Mitsubishi Electric Corp.

Japan

Market(Ticker): TKS(6503)
Sector:
Industry:
Electronic Technology
Electronic Equipment/Instruments
Market cap(USD): 33,051.01M
Shares: 2,147.20M

Nippon Sharyo, Ltd.

Japan

Market(Ticker): TKS(7102)
Sector:
Industry:
Producer Manufacturing
Trucks/Construction/Farm Machinery
Market cap(USD): 380.11M
Shares: 146.75M

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