SAGAMIHARA, Japan -- Mitsubishi Heavy Industries (MHI) plans to free capacity and focus on building forklifts and diesel engines.

The Nikkei Weekly said MHI and Caterpillar had agreed to transfer compact construction machinery manufacturing to their joint venture, Shin Caterpillar Mitsubishi.

By the end of 2004, compact bulldozers, wheel loaders and other products will be moved from MHI's Sagamihara plant to Shin Caterpillar's facility in the same city.

The Nikkei report said MHI would use the additional capacity to concentrate on diesel engines and forklifts, which had seen growing demand.