THE Fukushima nuclear disaster has forced the evacuation of tens of thousands of people and the cost estimates for clean-up and compensation run as high as ¥4 trillion (about $50 billion). There have been worries about the safety of the food supply. Given the seriousness of these concerns, less notice has been taken of another ill effect of the crisis—the heavy toll on the three Japanese industrial champions who are the country's main suppliers of nuclear-power technology.

The reactor business has dried up for Hitachi, Mitsubishi Heavy Industries (MHI) and Toshiba, and is not expected to return any time soon. On August 4th word leaked out that Hitachi and MHI are in talks about combining certain operations, such as power technology and rail transport. Their share prices soared (3% in the case of Hitachi and 4% for MHI). The two companies seem to have been caught off guard when the reports appeared in a Japanese newspaper: first they denied them, then later confirmed that talks were under way. Some sort of a tie-up would make sense. The two companies had depended on the nuclear business as one of their biggest growth areas and profit centres, even though it produced only a small share of their revenues (4% for Hitachi; 10% for Toshiba). A fully merged Hitachi and MHI would boast revenues of ¥12 trillion and be one of the largest engineering groups in the world. Yet it would be a bloated, unmanageable mess too.

Hitachi is already one of the world's biggest companies, with 360,000 employees in more than 100 countries. It is renowned for making everything from microwave ovens to the nuclear reactors that power them. Yet despite enjoying sales equivalent to more than $100 billion a year, it barely ekes out a profit (averaging a meagre 2% margin over the past decade). MHI boasts 70,000 employees, global operations and minuscule earnings as well, a mere 3% of income last year. That does not give either firm much of a cushion when business stumbles.

With a severe downturn in their nuclear operations and spillover damage to "brand Japan" for big infrastructure products like turbines and trains, the Japanese conglomerates needed to respond. A merger makes sense in areas where each of the two firms is already strong, but need each other to develop a fuller suite of products. For example Hitachi makes trains but does not lay tracks, which MHI does. The two have already co-operated on projects in emerging markets using just this strategy.

Hidden strengths

Yet combining the businesses, if it comes to pass, requires care since there is a risk of creating a muddle. Hitachi has some of the world's most impressive green-energy technologies, but they are lost in a corporate structure ill-equipped to exploit them. Water purification? Materials science? Also strengths that go undersold. Likewise, MHI has excellent technologies but lacks the management acumen to realise their value.

One rationale for a deal is that both companies could benefit from a shift away from nuclear power, but in different ways. Hitachi is strong in steam turbines for coal-power plants, whereas MHI is a leader in high-efficiency gas turbines (particularly for "combined-cycle" power plants, in which it holds a 45% market share in Japan). Their excellent performance puts them in great demand in emerging markets.

Over the past year Hitachi has tried to embark on restructuring its business towards industrial technologies and out of consumer electronics. It sold its computer hard-drive unit earlier this year and this week said it may get out of manufacturing television display panels (but will still design them domestically and outsource the assembly). Yet the moves are too little too late; the company holds on to poorly-performing units for far too long, and only takes action when there is a crisis.

For years Japan Inc could see the sense in restructuring and consolidating. But it resisted pursuing these, for reasons of corporate pride. Only sick firms slim down or merge, is the prevailing attitude: healthy ones beef up or go it alone. It has taken a terrible disaster to start to change this ill-conceived ethos—and possibly bring two great but underperforming Japanese companies together.