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Mitsubishi and Toshiba to merge automation systems businesses

01 April, 2003

Mitsubishi and Toshiba are combining their industrial electric and automation systems businesses in a new joint venture with effect from 1 October, 2003. The new 50:50 joint venture company - so far, unnamed - is expected to be the world`s third-largest player with around 6% of the market, behind Siemens with an 18% stake, and ABB on 12%.

The joint venture will bring together all key functions including development, engineering, manufacturing, sales, installation and services. Products covered include drives systems, industrial supervisory control systems and power distribution systems.

Initially, the new company will employ around 2,300 people and the target is to generate an operating profit of ¥8bn (£42m) on sales worth ¥160bn (£840m) by 2006. It will integrate the relevant divisions of each partners, including TMA Electric Corporation - an existing JV between Mitsubishi and Toshiba that makes large motors - and Toshiba`s Japanese subsidiary, Toshiba GE Automation Systems.

Toshiba has recently reached an agreement with GE to take full control of Toshiba GE Automation Systems which was previously a joint venture with the US corporation. The operation, established in 2000, focuses on industrial drives and automation systems.

The decision to merge the businesses comes against a background of a continuing tough market for industrial electric and automation systems, particularly in Japan where manufacturers are still cutting back on capital investments. Although demand is more stable outside Japan, competition is intensifying. Mitsubishi and Toshiba hope that, by combining their operations, they will be able to boost their competitiveness and their global presence.

The partners believe that reorganising their development and manufacturing facilities and integrating their product lines will make their products more competitive. Centralised product development will shorten development times while reorganising their manufacturing should improve the cost-competitiveness of their products.

Mitsubishi and Toshiba also argue that the integrated business with a new management structure will promote speedy decision-making and enhance the efficiency of the business. The combined operation will have a more powerful market presence, they contend, while a more global sales network will boost their visibility outside Japan.

• Toshiba`s joint drives venture with Schneider Electric, Schneider Toshiba Inverter, has formed a subsidiary in China to manufacture the Altivar 28 and 58 drives, mainly for the Chinese market. Another new subsidiary, ST Inverter America, located in Houston, will carry out research and development and manufacture new ranges of variable speed drives. Schneider owns 60% and Toshiba 40% of the holding company, Schneider Toshiba SAS, which has 470 employees and sales of €400m. It already has development, production and marketing subsidiaries in France and Japan.

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