February 5, 2013 / 10:21 AM / 7 years ago

Boeing battery maker sees lower profits - not due to 787

KYOTO, Japan (Reuters) - GS Yuasa Corp, the firm whose products are the focus of U.S. and Japanese investigations into what caused battery problems on Boeing Co’s 787 Dreamliner, said it did not expect the issue to hurt either its earnings or its reputation.

A 3D-converted CT scan image shows the burnt auxiliary power unit battery, removed from an All Nippon Airways' (ANA) Boeing Co 787 Dreamliner plane which made an emergency landing on January 16, 2013 in Takamatsu, is seen in this undated handout image and released by the Japan Transport Safety Board (JTSB) February 5, 2013. REUTERS/Japan Transport Safety Board/Handout

Kyoto-based GS Yuasa, valued at around $1.5 billion, said it did not expect the airplane battery problems to impact orders from automakers for its lithium-ion batteries, and it kept its forecast for full-year operating profit of 10 billion yen - which would be more than a third below last year.

At a news conference on Tuesday, GS Yuasa director Toshiyuki Nakagawa skirted around questions on the status of the company’s supplies to Boeing - a business that accounts for less than 1 percent of its revenue.

“We cannot comment on the details of the investigation, but we have confidence in the quality of our manufacturing,” he said. “As any manufacturer, we would never supply anything that is dangerous,” he said in response to a question on the potential danger of lithium-ion battery technology. “But these incidents have occurred, and we must properly find the cause.”

The company, which has stated it sees lithium-ion batteries as a central part of its business, and a future profit driver, said it did not plan to list possible damages claims as a potential risk in its quarterly filings.

All Boeing’s 787s have been grounded since January 17 as investigators hunt the cause of two incidents with the plane’s lithium-ion batteries - a battery fire on a Japan Airlines (9201.T) 787 at a U.S. airport and the emergency landing of a domestic All Nippon Airways (9202.T) flight after battery problems triggered a smoke alarm.

Japan’s transport safety agency said it is still unclear whether battery chemistry or an electrical issue caused the main battery on the ANA flight to overheat, forcing it to make the emergency landing.

Boeing has not changed its production plans for the lightweight, carbon-composite Dreamliner, but it has stopped delivering new planes while the investigations continue.


GS Yuasa said operating profit in April-December - before the recent 787 problems - dropped 28 percent to 6.46 billion yen on revenue that fell 4.6 percent to 196 billion yen, as automakers placed fewer orders for lithium-ion batteries and sales were sluggish in Southeast Asia and Europe.

The company, created in 2004 from the merger of Japan Storage Battery and Yuasa, employs around 12,400 people making batteries for cars, motorcycles - with 27 percent market share, it is a global leader - and a range of industrial customers. In November, the company, led by president Makoto Yoda, won an order to supply lithium-ion batteries for the International Space Station.

Ahead of the results, GS Yuasa shares ended 0.3 percent higher, but are still down more than 5 percent since the Boston fire on January 7.


In a sign that the investigation may be becoming more complex, Japan Transport Safety Board JTSB.L chairman Norihiro Goto told a news conference investigators may widen their probe to other equipment on the Dreamliner.

The JTSB said it would send its investigators to Thales (TCFP.PA), the French company that makes control systems for the 787 battery, if needed.

CT scans showed six of the main battery’s eight cells on the ANA Dreamliner were badly damaged, charred and deformed, Goto said, adding a small hole was found in one cell, which was one of the least damaged.

On Monday, Boeing asked the Federal Aviation Administration FAA.L for permission to conduct Dreamliner test flights, suggesting it is making progress in finding a solution to the battery problems. Japan’s Civil Aviation Bureau said it was told about the Boeing request by the FAA.

Launch customer ANA is the world’s biggest Dreamliner operator with 17 of the jets. With local rival JAL owning seven, Japan accounts for almost half the 50 787s in service.

ANA said last week it lost around $15 million in revenue as a result of the Dreamliner grounding, while JAL said the halting of 787 flights would shave $7.6 million from its operating profit in the year to end-March. Both companies have said they will discuss compensation for the losses with Boeing. (Additional reporting by Yoshiyuki Osada in KYOTO and Tim Kelly in TOKYO; Writing by Dominic Lau; Editing by Ian Geoghegan)

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