Japan worries about Boeing retreat in wake of JAL defection

Wed Oct 9, 2013 12:56pm EDT
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By Tim Kelly

TOKYO (Reuters) - For five decades Boeing Co. (BA.N: Quote) has awarded bigger and bigger shares of its supply contracts to Japanese firms, but that could change after Japan Airlines' (9201.T: Quote) shock defection to Airbus EAD.PA and as the planemaker seeks to win orders in China.

Boeing's carbon composite 787 is 35 percent made in Japan - as big a share as it builds in-house - but Japanese aviation insiders fear the Dreamliner could be the high water mark of the industry's partnership with the U.S. company.

The close co-operation has not only benefitted Japan's industrial giants Mitsubishi Heavy Industries (7011.T: Quote), Kawasaki Heavy Industries (7012.T: Quote) and Fuji Heavy Industries (7270.T: Quote) - it has also enabled Boeing to dominate one of the world's biggest aviation markets with a share of more than 80 percent.

That status quo crumbled on Monday, when JAL signed a deal to buy 31 Airbus A350s, its first purchase of European jets.

In rejecting the rival Boeing 777X, JAL can only have increased the likelihood that the U.S. company's next project will be less Japanese.

"Negotiations for the 777X work share are ongoing, and that may be influenced by the JAL decision," a government official who helps oversee Japan's aerospace industry told Reuters on condition of anonymity because of the sensitivity of the talks.

Tokyo, he added, was looking to win a work share for Japanese suppliers greater than the 21 percent that Mitsubishi Heavy, Kawasaki Heavy and others build of the current 777.

The fear in Japan is that Boeing, which says the business it gives Japan adds up to 22,000 jobs accounting for around 40 percent of nation's aerospace workforce, may be tempted to shift more production to China, South Korea or elsewhere.   Continued...

The Boeing logo is seen at their headquarters in Chicago, April 24, 2013. REUTERS/Jim Young