Ishikawajima-Harima Heavy Industries Company, Ltd.

views updated

Ishikawajima-Harima Heavy Industries Company, Ltd.

Toyosu IHI Building
1-1, Toyosu 3-chome
Koto-ku
Tokyo, 135-8710
Japan
Telephone: (81 03) 6204-7800
Fax: (81 03) 6204-8800
Web site: http://www.ihi.co.jp/index-e.html

Public Company
Incorporated: 1889 as Ishikawajima Shipyard Company, Ltd.
Employees: 6,866
Sales: ¥1.12 trillion ($9.59 billion) (2006)
Stock Exchanges: Tokyo
Ticker Symbol: 7013
NAIC: 551112 Offices of Other Holding Companies

World-renowned for generations for shipbuilding, Ishikawajima-Harima Heavy Industries Company, Ltd. (IHI), is one of Japan’s leading industrial groups. IHI’s numerous subsidiaries are involved in a host of industries, particularly aerospace, construction equipment, and transportation equipment. The group is a pioneer in advanced technologies including nuclear fusion, superconductivity, lasers, and advanced compound and ceramic materials. With the decline of the shipbuilding industry, IHI used diversification as well as research and development to foster growth. IHI’s desalination plants, for example, have won acclaim in a number of countries—particularly in the Middle East.

A major shift in production and marketing emphasis during the 1980s made heavy industry and plant technology the source of close to 70 percent of the company’s income. Also strong was the company’s aerospace division, which produced jet engines, and led the industry in developing space rockets and experimental devices. While partnering with Western companies in papermaking machinery, and jet engines, and steel rolling mills, IHI has begun low-cost manufacturing operations in China through partnerships with local factories.

FEUDAL ORIGINS

In 1853 Lord Narica Tokugawa of METO was appointed by the ruling Tokugawa Shogunate to build a shipyard on Ishikawajima. This island at the mouth of the Sumita River, which flows into Tokyo Bay was strategic for the coastal defense of Japan.

The year 1853 was a particularly propitious time to start a shipbuilding company in Japan. As the number of U.S., British, German, and other interests in the Pacific area increased, new pressures were being brought to bear to lift Japan’s centuries-old barriers to trade with foreign nations. Shoguns, powerful clans that were outgrowths of the feudal system, ruled the country, with an emperor as a figurehead. In the mid-19th century, the Tokugawa shogunate in power realized that trade would soon be reopened—by force if not by consent. Even though trade was reopened peacefully after Commodore Matthew Perry had sailed a U.S. fleet into Japanese waters in 1854, the fear of a possible attack spurred the Japanese government to begin production of modern western-style ships.

With the lifting of trade barriers and exposure to new cultural and economic influences, a rapid process of industrialization was soon underway. Feudalism and the shogun system were abolished and power was transferred to an imperial government whose announced intention was to modernize the nation. Coming to the throne in 1868, Emperor Meiji conscripted an army, and, at the same time, set plans in motion to adopt some of the technology and work methods developed abroad.

The new government’s plans to become active in the worldwide industrial revolution called for encouragement of private enterprise. Accordingly, the government sold the Ishikawajima shipyard in 1876 to Tomiji Hirano, a civilian. As Ishikawajima Hirano Shipyard, the company became Japan’s first private shipyard and, within a year, produced Tsuun Maru, the first steamship built by a Japanese shipbuilder.

Diversification began in 1883, with production of the nation’s first steel bridge. The Miyako Bridge spanned the Ooka River in Yokohama. Four years later, the company constructed the largest steel bridge yet built in Japan, across Tokyo’s Sumita River.

Incorporated in 1889, the company was renamed Ishikawajima Shipyard Company, Limited. In 1892, the company built the nation’s first 80-horsepower air compressor and first high-speed power-generating boiler.

NEW INDUSTRIES IN THE 20TH CENTURY

Another name change was made in 1893 when Tokyo Ishikawajima Shipyard Co., Ltd., became a joint-stock company. Three years later the company constructed Japan’s first thermal power plant facilities. Ishikawajima began manufacturing steel structures for Tokyo’s National Sports Hall in 1909, and for Tokyo Central Station in 1911. Ishikawajima constructed Japan’s first four-ton open-hearth-furnace charging crane in 1916, and first ingot crane in 1917; both were built for state-run steel-production companies.

After World War I, and despite a severe earthquake in 1923, the company continued its research and development, innovation, and expansion into new product lines. In 1924, the Ishikawajima Airplane Manufacturing Company began operation, and by 1929 the Ishikawajima Automobile Manufacturing Company was established.

The second Sino-Japanese War and the start of World War II increased demand for Ishikawajima’s established products and resulted in new product developments such as the 350-ton hammer-head crane in 1935 and the nation’s first jet engines ten years later—both for the Japanese Navy. A subsidiary, Ishikawajima Shibaura Turbine Company, began operations in 1936.

Japanese industries achieved a relatively quick recovery following the nation’s defeat in World War II. The company, renamed Ishikawajima Heavy Industry Co., Ltd., in 1945, began to renew its reputation as innovator by 1956 when it manufactured the world’s largest spherical gas-storage tank. In 1958 Ishikawajima completed Japan’s first mobile offshore drilling platform and in 1959 built its largest blast furnace to date. That same year, the company established its first foreign subsidiary, in Brazil.

1960 HARIMA MERGER

A new era for Ishikawajima—and the change to its current name—began in 1960 as the company merged with the 53-year-old Harima Shipbuilding & Engineering Company, Ltd. A major shipyard known for its construction of large vessels, Harima had three subsidiaries of its own.

Ishikawajima-Harima was joined with several other companies within the decade. These included Nagoya Shipbuilding Co., Ltd. and Nagoya Heavy Industries Co., Ltd., in 1964, Shibaura United Engineering in 1967, and Kure Shipbuilding & Engineering Co., Ltd. in 1968. (Kure had separated from Harima Shipbuilding in 1954.)

COMPANY PERSPECTIVES

The IHI Groups is a total engineering company engaging in research of cutting-edge technology. Along with raising the level of development and production capacity of key components, the Group plans to expand into software and systems-oriented business. The Group has charted a course for raising the level of customer satisfaction as a way of contributing to solutions to various issues confronting Japan and societies around the world in the 21st century, as well as to improving the very foundations of society and industry.

In 1961, IHI developed a variety of steel known as IN, which maintains high toughness at low temperatures. The merged companies combined transport-producing facilities to create additional innovations such as the world’s first mammoth tankers, a series of standardized multipurpose dry cargo carriers produced in the 1960s, the world’s first barge-mounted polyethylene plant, and a series of high-powered jet engines. A cement calcinating process was developed in the early 1970s.

International operations proliferated from the early 1970s onward, as IHI acquired contracts with overseas companies or formed joint ventures with them. Services the company rendered to developing countries ranged from project planning through design, engineering, construction supervision, plant maintenance, and training of personnel.

As Japan’s top manufacturer of jet engines, IHI was part of a five-country consortium, including the United States, United Kingdom, West Germany, and Italy, to develop a V2500 turbofan engine to power 150-passenger commercial jetliners. Under development since 1983, the engine was certified by the U.S. Federal Aviation Administration in 1988 and went into production.

A joint venture in 1988, with Sumitomo Heavy Industries, established Diesel United Company, which rapidly gained 20 percent of the domestic market in industrial machinery. ICA Technologies, Ltd., another 1986 IHI joint venture—with ATEQ Corporation of Oregon, and Canon Sales Company of Tokyo—was formed to enter the semiconductor-related market. It also established the IHI Granitech Corporation, to advance stone processing for building construction; Ishikawajima Systems Technology Company, a systems engineering company for production of electronics and computers; and Joy Planning Company, in the area of fitness clubs and sports facilities. In addition, IHI entered real estate development of prime idle lands in the Tokyo Bay area. IHI has survived partially because of success in technology and partially because of the company’s proactive responses to market conditions. The company’s policy has been almost continual diversification into new and profitable enterprises.

IHI, which maintained close ties with the Toshiba Corporation, has placed its stamp on products and projects around the globe. Examples included large-scale bridges in several countries, a floating pulp plant in Brazil, desalination plants in the Middle East, a rolling mill in Shanghai, container ships in Singapore, an iron ore carrier in Australia, ethylene plant compressors in China, a blast furnace in Korea, laser processing systems in Europe, and cement plants in Indonesia, India, and Saudi Arabia.

Shipbuilding orders declined in the late 1980s. Plant export businesses lost profitability because of the strong yen. IHI, however, continued to show an overall profit in 1989 by scaling down affected operations and concentrating on the expanding air- and space-related divisions. Focus has shifted to domestic markets and the development of electronic products.

IHI’s mass-produced machinery remained a strong sector. The 1988 sales for this division were up 20 percent from 1987. Its products included compressors, dishwashers, precision machining, and turbochargers. IHI was ranked as the top manufacturer of integrated turbochargers for marine diesel engines and automobiles. IHI was also participating in NASA’s manned space station project by developing an experimental module.

KEY DATES

1853:: Tokugawa Shogunate establishes shipyard on Ishikawajima in Tokyo Bay.
1883:: Shipyard builds Japan’s first steel bridge.
1924:: Ishikawajima Airplane Manufacturing Company launched.
1929:: Ishikawajima Automobile Manufacturing Company established.
1945:: Company renamed Ishikawajima Heavy Industry Co., Ltd.
1960:: Ishikawajima merges with Harima Shipbuilding & Engineering Company, Ltd.
1968:: After merging with Shibaura United Engineering, Harima merges with Kure Shipbuilding & Engineering Co., Ltd.
1994:: Yokohama Engineering Center built.
2000:: IHI Aerospace Co. Ltd. formed to take over Nissan operation.
2002:: Shipbuilding business becomes IHI Marine United Inc.
2004:: Machinery joint ventures set up in China.

IHI had annual group revenues of about ¥1 trillion in the early 1990s, and it was profitable. Shipbuilding continued to be an important part of IHI’s business. In 1993 the company agreed to share its expertise in building liquefied natural gas (LNG) vessels with Newport News Shipbuilding and Drydock Co. IHI set up Marine United with Sumitomo Heavy Industries, Ltd., a couple of years later. The company built its Yokohama Engineering Center in 1994. This gathered 1,400 engineers into one central eight-story facility. A second engineering center was constructed in 2002.

GROWING AEROSPACE BUSINESS

The aerospace business was growing both organically and through acquisition. In 1998, the Somo Aero-Engine Plant was built to supply jet engine parts. Two years later, in 2000, IHI acquired the aerospace business of Nissan Motor Co., Ltd., for about $375 million. It had revenues of about ¥50 billion a year and was best known for making solid-fuel motors for missiles and Japan’s H-2 rocket. In 2003 IHI’s space development business was rolled into this unit, renamed IHI Aerospace Co. Ltd.

Much of the aerospace industry in Japan was focused on the defense sector. IHI produced engines for certain Boeing and Sikorsky military helicopters being built under license in Japan. Its XF7 engine, designed with the Japan Defense Agency, had the possibility of one day becoming the country’s first commercial jet engine, however. This was being used to power the Kawasaki P-X maritime patrol aircraft, which was preparing for its first test flight in 2007, but its quiet and fuel efficient design made it a natural for regional airliners.

Another important project on the launch pad was a new midsize rocket to establish a commercial space launch service. IHI was developing the craft, called the GX, in collaboration with Japan’s space agency. It was due for its first test in 2011, though it had been subject to delays before.

Japan’s transport ministry was aiming to consolidate the country’s shipbuilding industry to make it more competitive with that of Korea. However, a proposed merger of IHI’s shipbuilding operations with those of Kawasaki Heavy Industries Ltd. fell through in 2001. IHI’s shipbuilding division became a separate corporation, IHI Marine United Inc., in 2002. In 2003, IHI took over the transit and traffic systems business of failed Niigata Engineering Co., Ltd., adding a well-known railcar manufacturing operation to the group.

INTERNATIONAL COLLABORATION

IHI had continued to forge alliances with other companies across the world. In 2001, the company spun off its paper manufacturing machinery unit into a joint venture with Germany’s Voith. IHI set up three machinery joint ventures in China in 2004. These included plants for making automotive turbochargers, mechanical parking systems, and compressors. The IHI METALTECH Co., Ltd., rolling mill joint venture was formed in 2005 with Austria’s Voest-Alpine Industrieanlagenbau GmbH & Co. This was aimed at growing business in developing economies.

A sluggish economy helped keep IHI in the red for a couple of years but it returned to profitability in fiscal 2004/05, when it posted net income of ¥2.1 billion on revenues of ¥1.1 trillion. Sales for the fiscal year ended March 2006 rose to ¥1.13 billion ($9.59 billion); net income was ¥5.3 billion. A little more than one-third of sales came from overseas. Energy and Plant Operations was the largest business segment, with total sales of ¥311 billion.

The aerospace business was one of the fastest-growing areas for the company. IHI set up an aircraft engine part facility in northern Japan in 2006 and was planning to invest another ¥23 billion on engine facilities. This amount was just 10 percent of its total three-year budget for capital improvements and research and development expenditures. IHI was a partner with General Electric in developing a new engine for Boeing’s 787 Dreamliner jet.

Betty T. Moore
Updated, Frederick C. Ingram

PRINCIPAL SUBSIDIARIES

IHI Inc. (United States); IHI Aerospace Co., Ltd.; IHI METALTECH Co., Ltd.; IHI Marine United Inc.; IHI Turbo America Co. (US); Ishikawajima Construction Machinery Co., Ltd.; Ishikawajima Construction Materials Co., Ltd.; Ishikawajima Hanyoki Service Co., Ltd.; Ishikawajima Mass-Produced Machinery Co., Ltd.; Ishikawajima Plant Construction Co., Ltd.; Ishikawajima Shibaura Machinery Co., Ltd.; Ishikawajima Ship & Chemical Plant Co., Ltd.; Ishikawajima Transport Machinery Co., Ltd.; Niigata Power Systems Co., Ltd.; Niigata Transys Co., Ltd.; PC Bridge Co., Ltd.; Star Farm Machinery Manufacturing Co., Ltd.; Voith IHI Paper Technology Co., Ltd.

PRINCIPAL DIVISIONS

Logistics Systems and Structures Operations; Industrial Machinery Operations; Energy and Plant Operations; Aero-Engine and Space Operations; Shipbuilding and Offshore Operations; Other Operations.