Kawasaki's Environmental Plant Division to Become a Subsidiary

 Tokyo, January 31, 2006 – Kawasaki Heavy Industries, Ltd. today announced that its Environmental Plant Division will be separated and merged with a wholly owned subsidiary, Kawasaki Environmental Plant Engineering, Co., Ltd. (KEE), on October 1, 2006.

 Since entering the eco-market, Kawasaki has actively developed technologies to treat an increasing amount of diversified municipal and industrial waste, as well as developing recycling facilities and equipment. The Company has also been enhancing the operational structure and cost-competitiveness of its environmental business, as outlined in its medium-term business plan, established in November 2000.

 However, the business has faced diminishing orders and fierce price competition in Japan, its main market. Although Kawasaki foresees a gradual recovery, in part due to the demand for replacements of existing plants, harsh market conditions are expected to continue for several more years. As a result, the Company has decided to separate the business.

 The bolstered KEE, which will be renamed on October 1, will pursue greater management agility and efficiency to boost operations and achieve greater cost competitiveness, as well as to pursue greater selectivity and focus by concentrating corporate resources into the development of new and core technologies. As environmental conservation becomes an increasingly important issue in society, the new company is committed to contributing to the prevention of global warming and to building a sustainable society through its recycling technologies and more effective use of the waste heat generated during treatment processes.

 Kawasaki will provide management support, including business opportunities, technology and funds, to the new company. Kawasaki has begun implementing policies that demonstrate the collective strength of the Kawasaki Heavy Industries Group, with the aim of further increasing the value of the Group as a whole.

Overview of New Company