February 6, 2008 / 6:21 AM / in 10 years

M'bishi Heavy to stop part of Bombardier production

TOKYO (Reuters) - Mitsubishi Heavy Industries Ltd (7011.T) said on Wednesday it will stop making parts for Bombardier Inc’s (BBDb.TO) regional jets as it prepares to make its own passenger jet and compete with Bombardier in 2012.

Mitsubishi Heavy spokesman Hideo Ikuno said the company aims to focus its resources on the promising commercial aircraft business, such as the Boeing 787 Dreamliner (BA.N), with the move.

The news also came just before Japan’s largest heavy machinery maker is set to make a final decision on the launch of its 150 billion yen ($1.4 billion) regional jet project, dubbed Mitsubishi Regional Jet (MRJ), which will seat 70-90 passengers.

Mitsubishi Heavy hopes to start operating the jets in 2012.

Mitsubishi Heavy has said it aims to sell 1,000 regional passenger jets over the next 20 to 30 years, grabbing one-fifth of expected new demand in a market now dominated by Bombardier and Brazil’s Embraer (EMBR3.SA) (ERJ.N).

On Wednesday, Mitsubishi Heavy said it will stop making components such as the aft fuselage for two types of regional airplanes it jointly developed with Bombardier, its only partner in the regional jet business, but it will continue to supply parts to Bombardier’s business jets.

The Japanese company will book a 27 billion yen ($250 million) special loss due to the costs involved with transferring the production to Bombardier, but the loss has already been factored into its revised outlook, it said.

Separately, the heavy machinery maker raised its earnings outlook for the year ending in March, citing improved profitability in its shipbuilding and machinery businesses.

It now expects 130 billion yen in operating profit, up from 115 billion yen in its previous forecast and above 127.1 billion yen in a poll of 15 analysts by Reuters Estimates.

The firm also said its April-December operating profit rose 27.3 percent to 93.98 billion yen.

Shares of Mitsubishi Heavy rose after the earnings news. The stock ended up 1.6 percent at 445 yen, bucking the benchmark Nikkei average’s .N225 4.7 percent decline.

Reporting by Aiko Hayashi and Taiga Uranaka; Editing by Chris Gallagher

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