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UPDATE 1-GE partner IHI and Rolls Royce ally MHI discuss jet engine parts alliance

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TOKYO, March 14 (Reuters) - IHI Corp, General Electric's jet engine partner in Japan, may tie up aircraft engine part production with Mitsubishi Heavy Industries Ltd which is more closely aligned with GE's competitors.

IHI and Mitsubishi Heavy said there were discussing an alliance announcement after Japan's leading daily, the Yomiuri said the firms planned to establish a new company in which the Japanese government may also invest.

Mitsubishi Heavy makes parts for Rolls-Royce Holdings and Pratt & Whitney, a unit of United Technologies Corp.

IHI, which is the primary supplier of aircraft engines to Japan's military, and Mitsubishi Heavy said in a joint statement that no decision had been made regarding what form any joint venture might take.

The combination of the jet engine units of the two companies could bolster Japan as a leading maker of aircraft engines by creating a company with significant stakes in engine programmes that power much of the world's fleet of civilian jetliners. It would also align with the Japanese government's push to mould national champions out of the nation's fractured industrial landscape.

"Business alliances and partnerships to boost international competitiveness is in line with last autumn's law on industrial competitiveness," Japan's Minister of Economy Trade and Industry said at a regular press briefing on Friday when asked about the possible MHI and IHI partnership.

Japan's other big maker of jet engines, Kawasaki Heavy Industries may also join the alliance, the Yomiuri reported.

IHI is a major supplier and risk sharing partner on GE's GE-90 engine used on Boeing's 777 passenger jet as well as the more recent GEnX used to power Boeing's 747-8 and 787 Dreamliner. It also builds engines for Japan's F-2 fighter aircraft.

Mitsubishi Heavy makes parts for Rolls Royce's Trent 1000 engine, which is also designed for Boeing's 787. It also builds components for Pratt & Whitney's PW4000 used on Boeing aircraft as well Airbus's A31 and A330.