Key Boeing supplier Mitsubishi Heavy runs into virus turbulence

TOKYO/NAGOYA — After long enjoying its role as a major component supplier for Boeing’s flagship 787 Dreamliner, Mitsubishi Heavy Industries is now finding its dependence on the U.S. aircraft builder has more of the makings of a nightmare in the wake of the coronavirus outbreak.

Shock waves rippled across Aichi Prefecture, the heart of Japan’s aviation industry, when Mitsubishi Heavy began telling suppliers in mid-April to halt shipments — possibly until late May.

With Boeing suspending production of the Dreamliner, Mitsubishi Heavy is looking to close its Nagoya works for aircraft parts for up to a month. It also says it will intermittently halt the Hiroshima plant, which makes parts for other Boeing planes.

“We’ll probably have to cut production significantly,” a Mitsubishi Heavy executive said.

“We might have to suspend operations for a while,” a supplier said. Some of the smaller, cash-poor suppliers worry that they could go out of business if disruptions drag on too long.

Air travel has decreased dramatically around the world as the new coronavirus spreads. Fellow Boeing suppliers Kawasaki Heavy Industries and Subaru have decided to suspend production at key plants for two weeks or so until early May.

But Mitsubishi Heavy’s one-month break is extreme even compared with such players and reveals just how much it needs the American aircraft builder.

The Nagoya aerospace works is considered one of Mitsubishi Heavy’s crown jewels and produced many of its key officials over the years. It is also almost entirely reliant on orders from Boeing.

Boeing accounted for some 80% of Mitsubishi Heavy’s more than 200 billion yen ($1.86 billion) in sales from civilian aircraft for the year ended March 2019. The 787 Dreamliner in particular played a critical role.

Mitsubishi Heavy produces the composite wing box for the Dreamliner. The complex component requires a large number of parts, meaning greater inventory risks for the Japanese company.

Boeing resumed some aircraft production Monday. But with plane demand plunging, it will likely scale back orders to Mitsubishi Heavy in the future.

Headwinds buffeting the aviation industry also stand in the way of the SpaceJet, Mitsubishi Heavy’s more than 1 trillion yen project to build a homegrown passenger aircraft. Delivery has been delayed six times from the original 2013 target, and the company now expects its first full-year pretax loss in two decades, to the tune of 10 billion yen for the year ended March 31.

The pandemic will likely delay test flights and other needed steps toward commercialization. Airlines around the world could face long-term difficulties from falling demand, possibly leading to canceled SpaceJet orders.

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