The deal is expected to be closed by August after the two companies signed a memorandum of understanding, following Nissan's February 3 announcement that it wanted to offload the division as part of a major restructuring drive.

"As the automotive and aerospace industries require an increasingly global focus, the deal will allow both companies to concentrate their technological and engineering resources on their core businesses," a Nissan statement said.

The world's fifth largest carmaker is seeking to reverse a slump in sales and earnings by focussing on its core operations under a restructure announced last October under the control of majority shareowner Renault SA.

"The sale of the aerospace division is one step in Nissan's restructuring plan that is aimed at achieving growth, improving profitability and reducing its debt," the statement said.

Nissan spokeswoman Ritsuko Harimoto declined to confirm a possible sale price for the division. "There are still discussions to decide about that," she told AFP.

A figure touted by the Nihon Keizai Shimbun earlier this month of 40 billion yen (370 million dollars) was "speculation," she said. IHI has also rejected the figure.

Nissan, hit by diving vehicle sales in Japan, has warned its earnings in this fiscal year to March could be even worse than forecast in November, when it announced a big interim net loss.

Nissan said its operating profit in the fiscal year could be lower than the 90 billion yen previously expected. Nissan predicts a net loss in the year of 590 billion yen.

Nissan expects to return to profitability in the fiscal year to March 2001, and is planning to halve its huge debt to 700 billion yen by March 2003.

Nissan's Aerospace Division started research on rockets in 1953. As an integrated rocket development and manufacturing division, the unit has contributed to development of solid propellant rockets for scientific sounding rockets and practical satellites.

Its aerospace and defence division, which would give IHI a cutting-edge in rocket technology, reported 51.15 billion yen in revenue in the year to last March, with 920 employees.

However, its prowess took a dent last Thursday after the Nissan-developed M5 rocket went awry after launch, causing a 105-million-dollar Japanese astronomical satellite to go lost in space.

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