The money-losing Daewoo Shipbuilding and Marine Engineering, the world’s biggest shipbuilder by order backlog, is desperately struggling to survive in the industry.
The industry‘s continued slowdown and the shipbuilder’s record 3.07 trillion won ($2.65 billion) shortfall in its second-quarter operating profit for this year have spawned speculations that DSME is readying a full-fledged restructuring process.
While the DSME management had refuted rumors about an imminent workforce cut, tension is rising in the shipyard over what measures the company will come out with to resuscitate its sagging business.
In a meeting with about 300 executive-level and mid-ranking employees on Monday, CEO Jung Sung-leep reportedly identified the causes of the recent massive loss from its offshore plant business and future plans.
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Maersk’s Triple E-class container vessel sits moored under construction at the DSME shipyard in Geoje, South Gyeongsang Province. (Bloomberg) |
The shipyard, along with two other top rival shipbuilders -- Samsung Heavy Industries and Hyundai Heavy Industries -- is said to have reaped little profit in its huge offshore plant business.
The Korean companies had aggressively expanded the offshore plant business in 2011 as an alternative to the sinking shipping industry during the global financial crisis.
But their cutthroat competition with foreign players in the market has led to low profitability, according to market watchers.
Samsung and Hyundai posted operating losses of 1.55 trillion won and 171 billion won during the same period, respectively.
During the first half of this year, the three shipyards are expected to post a combined loss of up to 6 trillion won, according to analysts.
Last year, the three shipbuilders suffered from massive losses mainly due to a rise in shipbuilding costs and lackluster performance from offshore plant construction.
The market analysts said it would be inevitable for DSME, which recorded the biggest second-quarter loss among the three, to consider sell off noncore affiliates.
According to industry sources, DSME Construction, DeWind and Future Leadership Center are widely believed to be disposed of in the initial stage of the firm’s asset sales. DeWind is a U.S.-based wind-power company and FLC operates Sunning Point Country Club in Yongin, Gyeonggi Province.
Some market watchers expect the company may soon begin giving out voluntary retirement offers. Hyundai already completed the voluntary retirement of 1,500 employees and Samsung is working on a similar procedure to ride out financial difficulties.
Despite the manpower cut rumors, the CEO has continuously stressed that “slashing jobs is not an option,” and that it would relocate the workforce to enhance efficiency and save costs.
But an analyst said it would be hasty for DSME to roll out any detailed plans, as the main creditor Korea Development Bank’s inspection into the company is still ongoing.
The state-run KDB’s inspection, which began on July 27, is expected to end in early September.
By Suk Gee-hyun (
monicasuk@heraldcorp.com)
