MHI to Boost Small Turbo Production Capacity to 3.2 Million Units -- Investment of Approximately 3 Billion Yen --

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September 29, 2004 No.1023

MHI to Boost Small Turbo Production Capacity to 3.2 Million Units
-- Investment of Approximately 3 Billion Yen --

Tokyo, September 29, 2004 - Mitsubishi Heavy Industries, Ltd. (MHI) is to boost its production capacity in small-size turbochargers by approximately 30%, to 3.2 million units p.a. (per annum), by May 2005, up from the current 2.45 million. The move is aimed at responding to increasing demand from automakers, especially in Europe, for small turbochargers that can provide the higher combustion efficiency demanded by today's tightened emission control standards. The increase in production capacity is to be carried out at an investment of roughly 3 billion yen.

The investment will be directed into a production line dedicated to small-size turbochargers for automobiles. Demand for turbochargers of this class is increasing in the European and Asian markets in tandem with strengthening of environmental regulations. In line with this trend, MHI's small turbocharger sales soared from 1.6 million units in fiscal year (FY) 2003 to a projected 2.3 million this fiscal year, with forecasts anticipating further increases to 3 million in FY2006.

MHI's investment will focus on the company's Sagamihara plant in Kanagawa prefecture, but independently production capacity increases will also be carried out at two other locations: MHI Equipment Europe B.V. (MEE), a wholly owned production subsidiary in the Netherlands that also engages in local marketing; and at KYPC, an assembly affiliate in Korea.

To enhance parts processing at Sagamihara plant, investment will target expanded production capacity mainly for the major high-value-added components - rotating parts such as turbine rotors and compressor wheels. This will be achieved through introduction of electron beam welders and new grinding machines. Low-value-added processing work will be transferred to outsourced contractors as much as possible to boost overall processing line efficiency. To improve assembling processes, the efficiency of lines for rotation balancing and automated assembly will be further enhanced.

To attain ever greater efficiency in responding to the growing European and Asian market, the functions of MEE and KYPC will be further strengthened - final assembly and local procurement, mainly large-size cast parts. Through these measures, MHI aims to speed up response to customers, minimize inventory, and simultaneously circumvent currency exchange risk.

With implementation of the foregoing initiatives, MHI seeks to firmly meet customer needs with respect to both product quality and delivery speed. In doing so, it looks to survive the shakeout affecting all manufacturers of small turbochargers, a field marked by fierce competition among suppliers, and targets to be the second largest turbocharger manufacturer in the world, following Honeywell.

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About Mitsubishi Heavy Industries
Mitsubishi Heavy Industries, Ltd. (MHI), headquartered in Tokyo, Japan, is one of the world's leading global heavy machinery manufacturers, with consolidated sales of 2,593 billion yen (US$21.6 billion) in fiscal 2002 (year ended March 31, 2003). MHI's diverse lineup of products and services encompasses shipbuilding, steel structures, power plants, chemical plants, steel plants, environmental equipment, industrial and general machinery, aircraft, space rocketry and air-conditioning systems.

For more information, please visit the MHI website (http://www.mhi.co.jp).

PRESS CONTACT:
Hideo Ikuno: h.ikuno@daiya-pr.co.jp
Tel: +813-6716-5277, Fax: +813-6716-5929
Daiya PR (in charge of public relations for Mitsubishi Heavy Industries, Ltd.)