In-depth | SHIPYARDHEME FEATURE TS Japanese yards bid to buck economic trend


Medium-sized Japanese yards are employing a variety of strategies to help them compete with cheaper foreign shipbuilders. Te high value Yen and the EU crisis may offer a rip tide for the Japanese yards to swim against yet most believe they can compete. Te Naval Architect reviews their strategies


favourable. All the yards that responded to questions from The Naval Architect agreed that the strong Yen meant that their vessels were too expensive to compete with Korean and Chinese shipbuilders. Class society ClassNK outlined the


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problems facing Japanese yards and succinctly outlines the various strategies that yards are using to overcome the problems. “Japanese shipbuilding is in a very


difficult position right now, not only because of the stagnant market, but also because of the incredibly strong Yen. In order to survive the current crisis, Japanese shipbuilders are exploring a number of different strategies including both mergers and expansion overseas, and I think we will continue to see more such efforts in the medium term,” says ClassNK executive vice president Shosuke Kakubari. Te class society, however, pointed out that,


“While their strategies may differ, Japanese shipbuilders continue to place a great emphasis on developing and maintaining technical expertise,


and as Japanese


yards continue to produce revolutionary technology and ship designs, I think that Japan will continue to produce a large share of the world’s ships for many years to come.” Effectively ClassNK reveal the three


key strategies being employed by Japan’s maritime industry that will see the country’s industry challenge its far cheaper competitors; namely merger, overseas expansion and innovation. One of the most high profile examples


of the strategies outlined by ClassNK is the merger between IHI and Universal, which is due to take place in October. According to a statement released in


January this year the two shareholders of IHI and Universal believe the merger is necessary in order for yards


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n the cold light of day the economic indicators


for the Japanese shipbuilding industry are not


Presidents Mishima (on the left) and Kurahara shake on a deal that will see the merger of their respective companies Universal Shipbuilding and IHI Marine United


in Japan to compete with Chinese and Korean shipbuilders. The statement said: “During this


examination, a review of the assumptions supporting the creation of the new company became increasingly needed because the business environment surrounding the shipbuilding business has changed considerably as a result of the financial crisis triggered by the Lehman Shock [sic]. Consequently, our examination took longer than initially expected.” As a result of the subsequent economic crisis


the shipbuilding industry is experiencing, “a severe business environment”. Te statement said as a result a “large demand-supply gap on a global basis” existed and that “substantial capacity expansion of Chinese shipyards and a sharp decline in global demand for new ships, as well as the excessive appreciation of the Japanese Yen below 80 to the US dollar,” had severely impacted on Japanese yards. Consolidation of IHI and Universal is


recognition that integration is “necessary for the shipbuilding industry in Japan to continue


business under hard competition for orders with Korean and Chinese shipyards”. Merger terms are still being evaluated,


although, much of the merger deal has been agreed already. For example the senior positions in the


new company, Japan Marine United (JMU) have been shared by IHI and Universal. IHI president Shigemi Kurahara will be JMU’s Chairman, while the Universal president Shinjiro Mishima will be JMU’s president. A further two auditor positions and four directorships of JMU will be shared between IHI and Universal. Even though some of the details of the


merger have yet to be finalised the date for the formal merger of the companies is 1 October 2012, if shareholders approve the deal at a meeting planned for 30 September. Should the deal be approved JFE Holdings,


parent of Universal, and IHI will each hold a 45.93% share in JMU, while Hitachi Zosen, which currently holds a 15.07% share of Universal, will hold 8.15% of the newly merged entity.


The Naval Architect September 2012


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