ECONOMIC SPOTLIGHT - MITSUBISHI HEAVY FIGHTS BACK

  International efforts to redirect Japan's
  export-driven economy toward domestic consumption face heavy
  going if the country's largest defence contractor and world's
  biggest shipbuilder is anything to go by.
      Mitsubishi Heavy Industries Ltd &lt;MITH.T> (MHI), which began
  making ships and iron goods for Japan's military rulers 130
  years ago, is responding to the strong yen by redoubling its
  efforts to maintain its share of export markets.
      "If we sell the best quality and the cheapest products,
  everyone will buy them," MHI president Yotaro Iida said.
      Although two of MHI's main businesses, shipbuilding and
  power plant construction, have been hit hard by the yen's 40
  pct rise against the dollar, the company has no plans to
  abandon them, Iida told Reuters in an interview.
      Its other big activity, aircraft component manufacture, has
  performed so well that MHI now accounts for half of the money
  Tokyo spends on defence procurement each year.
      "We have made the utmost efforts among the world's
  manufacturers to improve productivity," he said. "You may be
  surprised if you come to see our plants. The outside is old but
  the inside is ultra-modern, with robots and computers."
      Securities analysts at major securities houses agreed that
  MHI has pared costs more quickly than its competitors. The
  company has slashed its workforce to 47,000 from 86,000 in
  1976.
      Despite its cost-cutting, MHI expects profits to drop 40
  pct to 30 billion yen in the current fiscal year ending March
  31, from 1985/86's record 50.14 billion.
      And that includes gains from the sale of MHI's stake in
  Mitsubishi Motors Corp &lt;MIMT.T> for 49 billion yen.
      Iida is optimistic about the future, however. He said a
  resurgence of demand from the Middle East following the recent
  recovery in oil prices coupled with persistent demand for power
  plants in developing countries will help MHI restore its
  exports-to-sales ratio to the past decade's average of 30 pct.
      MHI's exports-to-sales ratio fell to 25.9 pct in the
  half-year ended last September, from 35 to 36 pct five years
  ago.
      China is the most promising market, although MHI also
  considers other non-oil-producing developing countries as major
  customers.
      "Our customers are all seen as being in trouble due to a
  lack of foreign currency," Iida said. But he added that he felt
  MHI could sell to those markets with Japanese government
  financial support.
      It can also finance the plants itself and recover its
  investment through product sales, a strategy Iida said could
  prove popular in the future.
      In shipping, MHI is fighting back against low-priced South
  Korean competition by building more technologically advanced
  carriers to carry liquefied natural gas and other products
  difficult to transport.
      Shipbuilders Association officials told Reuters MHI is the
  world's largest shipbuilder in terms of orders and capacity.
      Domestically, MHI is involved in 12 national projects,
  including development of nuclear fusion reactors and launch
  vehicles for man-made satellites.
      It has been the biggest contractor for the Japan Defence
  Agency's F-15 and F-14 jet fighters and missiles, although all
  of these have been built under licence from U.S. Firms.
      MHI is now heading up five Japanese companies seeking to
  develop the country's own fighter plane to replace the
  currently used F-1 support fighters in the late 1990s.
      Military experts said Washington is putting strong pressure
  on Tokyo to buy a U.S. Plane, either the McDonnell Douglas Corp
  F-18 or General Dynamics Corp F-16, to reduce Japan's huge
  trade surplus with the U.S.
      "It might be a good idea to jointly produce planes with U.S.
  Makers as Japan is supported by the U.S. Defence umbrella," Iida
  said.
      MHI also plans to cooperate with the U.S. In its Strategic
  Defence Initiative space defence program by participating in
  the project when it moves from the research stage, he said.
      The U.S. Has been seeking Japan's technological support.
      In fiscal 1985/86, aircraft accounted for 17.1 pct of MHI's
  sales, shipbuilding 17 pct and power plants 27.9 pct. Iida said
  the ideal ratio is power plants 30 pct, aircraft and special
  vehicles 25 pct and shipbuilding 15 pct.
      As for the remaining 30 pct, Iida said he wanted to shift
  the domestic focus away from heavy machinery sold to
  manufacturers and towards household goods, but he declined to
  specify which products.
      "By the end of this year, you may find our brand name on
  your daily products, although this does not mean we will run
  away from our mainstream business," he said.
  

