Troubled South Korean shipbuilder Daewoo Shipbuilding & Marine Engineering is seeking pay cuts and sales of subsidiaries as part of self-rescue efforts to stay afloat, a local news report said Tuesday.
Based in Geoje in South Gyeongsang Province, the shipbuilder plans to slash 10-20 percent of the wages of executives, office workers and manufacturing employees, as well as to sell shipbuilding subsidiaries such as DSEC, Samwoo Heavy Industries, Shinhan Machinery and Welliv, Yonhap News Agency said quoting unnamed sources.
Such self-rescue measures could be worth 3 trillion won ($2.5 billion) in total, well above a 1.8 trillion won self-rescue scheme previously submitted to its leading creditor Korea Development Bank in December, the report said.
“The company will submit the final version of the self-rescue plan to KDB within this week,” DSME spokesman Yoon Yo-han said, declining to comment on the upcoming final plan.
Since August of last year, the loss-making shipbuilder has reduced the number of executives at its head office to 41 from 55 and had them return 10-20 percent of their salaries.
However, the company has not yet officially announced a wage cut plan for this year.
The nation’s second-largest shipbuilder paid an average of 15 million won per employee a year to its 12,819 employees, who have worked for the company for an average of 16.7 years, as of the end of March, according to the company’s public filing.
The final self-rescue plan may include reducing workforce by 2,300 earlier than the previously scheduled timetable of 2019.
Local accounting firm Samjong KPMG has been conducting a stress test on DSME since early this month to gauge the shipbuilder’s ability to handle a systemic financial risk.
The financially troubled shipbuilder made a 5.5 trillion won operating loss in 2015 amid drying up of new orders in an industrywide slump.
KDB and other creditors are to review the final self-rescue plan and decide whether to provide financial assistance to the shipbuilder based on the results of the stress test by the end of June, according to industry officials.
As part of downsizing efforts, DSME CEO Jung Sung-leep said in a meeting with company officials that the shipbuilder’s head office will be relocated to its Okpo shipyard in Geoje in the future.
“In July, we will move about 250 employees under the offshore plant business from the head office in Seoul to Okpo,” spokesman Yoon said.
“We’re not relocating the entire workforce, just part of them,” he said.
The company is also considering nonpaid vacation for a month for all employees in the second half, he added.
Under strong pressure by the government and creditors, DSME earlier on May 20 unveiled an additional self-rescue plan to KDB. The plan included selling its headquarter building in central Seoul to real estate investment company Koramco Reits Management and Trust to raise 180 billion won and lease back the building later. The two sides agreed to close the deal by the end of August in a memorandum of understanding.
The company is also to spin off its profitable marine defense-related business unit, which builds combat support ships and naval submarines.
Out of its total liability of 1.3 trillion won, DSME has 980 billion won of debt maturing this year and next, according to industry data.
About 6,000 are expected to lose jobs in the shipbuilding industry this year as two other big shipbuilders — Hyundai Heavy Industries and Samsung Heavy Industries — also seek job cuts and asset sales to get financial lifelines from creditor banks.
Source: The Korea Herald