Mitsubishi Heavy put off by Hitachi's stance in alliance talks

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A key reason for the failure in alliance talks between Hitachi Ltd. and Mitsubishi Heavy Industries Ltd. was Hitachi's insistence of exercising control over its smaller rival.

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Mitsubishi Heavy put off by Hitachi's stance in alliance talks
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A key reason for the failure in alliance talks between Hitachi Ltd. and Mitsubishi Heavy Industries Ltd. was Hitachi's insistence of exercising control over its smaller rival.

The two companies had been discussing ways to integrate some operations, such as solar and wind power generation and railway systems, but postponed making an announcement scheduled for Aug. 4.

Hitachi, whose group sales are more than triple those of Mitsubishi Heavy, often called for an outright merger between the two companies, according to sources familiar with the negotiations.

Hitachi also demanded a larger stake in the joint venture that was to handle the combined operations, which would have made it a subsidiary, the sources said.

Mitsubishi Heavy, part of the influential Mitsubishi group, rejected both proposals.

"We are not in such a dire straits as to surrender ourselves to Hitachi," one source said.

Hitachi and Mitsubishi Heavy were considering combining their thermal and nuclear power generation operations to improve competitiveness when the Great East Japan Earthquake struck March 11.

The talks picked up pace after the crisis at the Fukushima No. 1 nuclear power plant clouded the global outlook for nuclear power generation, a key sector for both companies.

Hitachi and Mitsubishi Heavy also planned to focus on infrastructure projects in emerging economies, such as railway systems, partly to lessen the risks of the strong yen.

Both companies lose about 4.5 billion yen ($56.33 million) in annual operating profits for every 1-yen appreciation of the Japanese currency against the U.S. dollar.

Hitachi and Mitsubishi Heavy could still revive negotiations on integrating some operations because the business environment remains bleak for the two companies.

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