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Wednesday August 8, 9:02 pm Eastern Time

CORRECTED - CORRECTED-Taiwan-Japan train project may face delay-sources

In TOKYO story headlined ``Taiwan-Japan train project may face delay-sources'' released on Wednesday, please read in last paragraph ....Central Japan Railway Co Ltd .... instead of ....East Japan Railway Co (correcting company name)

A corrected story follows.

By Takeshi Yoshiike and Taro Fuse

TOKYO, Aug 8 (Reuters) - A high-profile Taiwan and Japanese bullet train project to link Taiwan's two biggest cities could face a setback due to gaps in opinion between the two sides over design and other details, sources at the Japanese group said.

Both sides have officially denied any delay, but the sources, who declined to be identified, on Wednesday warned that the bullet train may not meet its launch deadline of 2005.

A delay would deal a blow to Japan's ``Shinkansen'', or bullet train, consortium, which last December grabbed part of the T$446 billion project (US$12.85 billion) project away from a European group that had been given priority negotiation rights in 1997.

Signing the contract with Taiwan's High Speed Rail Corp was a major breakthrough for Japan's renowned Shinkansen, which had never been exported and faced strong competition from its European rival Eurotrain.

The railway project had already faced years of difficulty in moving forward, and the European consortium has demanded US$800 million in compensation from the Taiwan firm, arguing that its contract obliged Taiwan High Speed to award it the deal.

The sources said that Taiwan High Speed and the Japanese group, led by trading house Mitsui & Co , have agreed on the model of the bullet train, but were stalling on design of the railway line.

Those details, including format and materials, were supposed to be agreed upon by the end of May, they said.

``The project has just begun and if we remain locked in a wrangle over such basic matters, it's possible to see the project missing the October 2005 deadline,'' a senior official in the consortium said.

The Japanese side has insisted on the same format used at home citing safety reasons, while Taiwan High Speed prefers a more flexible approach of mixing Japanese and European styles.

Another consortium official said he suspects Taiwan wants to procure parts from European manufacturers instead of from the Japanese group.

OFFICIALS DENY DELAY

Officials at Taiwan High Speed and Mitsui denied any major delay, saying there were no disagreements over the basic design and format of the shinkansen project.

``There is no delay in the main railway project although construction of railway stations was behind schedule due to a 1999 earthquake,'' said a spokeswoman for Taiwan High Speed.

Toshihiko Nagao, a general manager at Mitsui's Taiwan High Speed Rail project department, echoed that view. ``The project is moving smoothly and there is no major gap between the Japanese and Taiwanese sides.''

The planned train, at a speed of 300 km/hour (186 miles/hr), will shorten the journey between Taiwan's capital, Taipei, and the port city of Kaohsiung to less than 1-1/2 hours from the current 4-1/2 hours.

The Japanese group also includes Mitsubishi Corp , Marubeni Corp , Sumitomo Corp , Mitsubishi Heavy Industries Ltd , Toshiba Corp and Kawasaki Heavy Industries Ltd .

Japanese railway companies Central Japan Railway Co Ltd and West Japan Railway Co are also providing technical assistance.

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