Press Information

MHI to Establish New Company for Commercial Aircraft Engine Operations
-- Measure Taken to Respond to Increasing Production Demand
And to Form Structure Enabling Enhanced Capital Strength --

No.1788
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Tokyo, March 31, 2014 - Mitsubishi Heavy Industries, Ltd. (MHI) has decided, effective October 1, to establish a new subsidiary company dedicated for commercial aircraft engines and transfer relating businesses to this new entity. The move has three aims: to create a wholly integrated structure encompassing all aspects from sales and engineering to manufacture and repair; to form a structure enabling enhancement of production capacity; and to promote greater capital strength through infusions of external funds.

The new company will handle all business aspects, from sales and engineering to manufacture and repair, with the aim of serving as a partner company in the commercial aircraft engine field, where development through international collaboration prevails. MHI will continue to perform procurement functions.

In recent years the commercial aircraft engine market has seen a succession of new product developments spurred by brisk demand, and significant growth is expected to continue going forward. In responding to this challenge, improvements in production capacity and manufacturing technologies are needed in order to boost competitiveness, and greater capital strength is demanded in order to continue participation in development programs. MHI has steadily expanded operations in this respect since first participating in the V2500 engine project in 1983, which involved collaboration spanning five countries. Subsequent projects have been undertaken together with International Aero Engines, Pratt & Whitney and Rolls-Royce, and going forward MHI will take steps to further strengthen its relationships with these and other companies as a way of responding expeditiously to the market’s expansion.

To enhance production capacity, a relationship of collaborative production has been formed with IHI Corporation (IHI) and IHI has been consigned to produce low-pressure turbine blades. In parallel with this development, discussions are under way toward having IHI make a modest capital investment in the new commercial aircraft engine enterprise. To enhance the new entity's capital strength, MHI has made a request of the Development Bank of Japan Inc. (DBJ) both to invest capital and to provide financing. Going forward the specifics will be worked out with IHI and DBJ, with MHI aiming for swift finalization of related agreements. However, MHI will remain as the majority shareholder of the new company.

MHI intends to work closely with the new company and to provide its full support to its business expansion initiatives.