Mitsubishi Heavy Industries Ltd. will separate its machine tools business later this year, according to a group statement, reassigning the business to Mitsubishi Heavy Industries Machine Tool Sales Co. Ltd., in a move described as “an absorption-type company split,” effectively setting up the smaller company as a wholly owned subsidiary rather than an operating unit of the larger business.

Mitsubishi Heavy Industries is a conglomerate operating in shipbuilding; plant construction for energy, chemicals, and metals; environmental equipment; industrial and general machinery; aircraft and aerospace systems; and air-conditioning systems.

It emphasized that “a fresh start as a dedicated machine tool company” with a “flexible management structure that expedites decision making, clarifies business responsibility, enhances responsiveness to changes in market environment and customer needs, and accelerates the strengthening and expansion of its business,” would make the new company more effective as a global competitor in a changing industrial market.

The spin-off is scheduled for October.

MHI’s machine tool portfolio is an extensive range of products for gear hobbing, shaping, and grinding, as well as larger machines and cutting tools for large-dimension part manufacturing.

MHI explained that the “demand structure” of the machine tool market has changed dramatically, in Japan and in other countries, and it observed that machine tool companies have sought to remain competitive by “expeditious decision-making that leverages their strengths as dedicated machine tool companies.”

Furthermore, the company noted that, in order to expand their business, machine tool builders have increased management flexibility and customer responsiveness.

The demand structure of the machine tool market has undergone dramatic change in Japan and other countries. In order to cope with this changed business environment, machine tool companies have endeavored to enhance their competitiveness through expeditious decision-making that leverages their strengths as dedicated machine tool companies. Furthermore, in order to expand their business, companies have had to increase their management flexibility and responsiveness to customers.

Making a fresh start as a dedicated machine tool company, the successor company will implement a flexible management structure that expedites decision making, clarifies business responsibility, enhances responsiveness to changes in market environment and customer needs, and accelerates the strengthening and expansion of its business.

The new Mitsubishi Heavy Industries Machine Tool Sales Co. will move its headquarters from Osaka to Ritto, in Shiga Prefecture, where the current Machine Tools Division offices are located. The new company will have over 1,000 employees.

MHI pledged to work closely with the successor company and support fully its business development.