ECONOMIC SPOTLIGHT - JAPAN SHIPBUILDERS RECOVERY
Japan's ailing shipbuilding industry
plans to refloat itself in a few years from the twin rocks of
recession and a strong yen through capacity and workforce cuts
and greater use of computers, industry sources told Reuters.
    The salvage measures, which include a government-sponsored
rationalisation program, are aimed at clawing back some of the
market which Japan, the world leader, has lost to South Korea
through currency and labour cost disadvantages, they said.
    The sources said South Korea's yards are now some 35 pct
more competitive than Japan's due to such factors.
    The government plans to help the industry shed 20 pct of
current capacity within two years through mergers and
regrouping under legislation put before Parliament this month
and likely to be approved by May or June, the sources said.
    They said from September a semi-government body will assure
repayment of about 50 billion yen in liabilities incurred
through job losses and the sale of excess capacity, and another
30 billion for buying unneeded land and equipment.
    Last Friday, the Shipbuilders Association of Japan applied
to the Fair Trade Commission to form a cartel to slash tonnage
built to about half of total capacity for a year from April 1.
    The commission has held several hearings with the industry
and approval should be given this month, the sources said.
    A clampdown on output over one or two years combined with a
planned cost-cutting and streamlining program and state support
should help Japanese yards recover their international
competitiveness, they said.
    Under the cartel proposals, 33 yards each capable of
building ships of more than 10,000 gross tonnes would build a
maximum of three mln compensated gross registered tonnes (CGRT)
in 1987/88. This is about half of total capacity.
    This will ease the cut-throat competition which forced most
yards to sign orders below cost, the sources said.
    The industry is likely to seek to renew the cartel for
1988/89 as the Transport Ministry sees new orders falling to
3.1 mln CGRT in 1988/89 from 3.3 mln in 1987/88, they said.
    The rationalisation program includes a cut of 20,000 to
30,000 of the estimated 100,000 workers in the industry between
1986 and 1989.
    Japanese yards topped world order books at end-December,
followed by South Korea and Taiwan, according to Lloyd's
Register of Shipping.
    However, falling orders and declining international
competitiveness due to the strong yen led to heavy losses in
the industry, the sources said.
    Four of Japan's six major heavy machinery and shipbuilding
companies reported current deficits in the first half of the
year to March 31 and five of them are expected to report
current deficits for the whole of 1986/7, they said.
    The shipbuilding companies' streamlining program will raise
productivity to compete with South Korean yards which have also
been hard hit by declining orders and low ship prices in recnt
years, the sources said.
    In Japan, no single yard leads the industry, resulting in
fierce competition and slow progress in reducing capacity. The
two largest firms -- Mitsubishi Heavy Industries Ltd <MITH.T>
and Ishikawajima-Harima Heavy Industries Co Ltd <JIMA.T> --
account for only 30 pct of ships built, the sources said.
    "World shipowners hope Japanese yards can manage to ride out
the recession as their technology is the best in the world,"
said an official at a major Japanese shipping company.
    The Japanese merchant fleet, the largest after Liberia's,
has no intention of shifting to other countries to buy ships,
and this will encourage Japanese yards, the sources said.
 REUTER
