Japan's Mitsubishi Heavy freezes SpaceJet development to focus on other units

By Tim Kelly

TOKYO (Reuters) - Mitsubishi Heavy Industries Ltd (MHI) <7011.T>, Japan's biggest aerospace manufacturer, said on Friday it would freeze development of its SpaceJet regional aircraft to focus on renewable energy and other businesses that will bolster profits.

MHI said it has halted SpaceJet's development because the prospects for Japan's first passenger aircraft in half a century have dimmed. The decision will allow it to halve jobs in its commercial aviation business, helping generate cost savings of 120 billion yen ($1.15 billion).

"We will work to review where we stand, make improvements and assess possible program restart," MHI said of the regional jet in its business plan.

Overall, the machinery maker said it would cut 2,000 jobs at overseas units and reassign 3,000 people internally to cut costs. It is dispatching about 1,000 workers to outside companies as well.

MHI on Friday posted a 62.5% decline in second-quarter operating profit to 12.7 billion yen. For the full year it expects a 50 billion yen ($478 million) operating profit compared with an earlier forecast on no profit.

SPACEJET

Japan's government had seen the SpaceJet project as a way to expand the country's aerospace industry beyond supplying parts for commercial jets built by other countries, particularly Boeing Co <BA.N> in the United States.

MHI's SpaceJet was originally slated to begin flying passengers starting in 2013 with launch customer ANA Holdings <9202.T>, which has ordered 32 of the planes, but technical problems and design mishaps forced MHI's aircraft unit to delay delivery six times.

ANA, Japan's biggest airline, this week said it would reduce its aircraft fleet by more than 10% to cope with the pandemic-induced air travel downturn.

MHI in March suspended plans for a SpaceJet variant seen as key to winning orders from U.S. airlines.

Japan said on Friday it had picked MHI to lead the development of a new stealth fighter jet that Japan wants operational by the mid-2030s to counter advanced Chinese aircraft.

The fighter jet project is expected to cost about $40 billion.

(Reporting by Tim Kelly; Editing by Tom Hogue and Gerry Doyle)