South Korea’s debt-ridden Daewoo Shipbuilding & Marine Engineering Co. (DSME) is skipping the regular summer break to keep up with the delivery schedule after a 51-day strike that destabilized the main dockyard ended through settlement last Friday.
DSME’s subcontract workers who staged a sit-down strike at No. 1 dock in Okpo, Geoje in South Gyeongsang Province for five weeks ended the strike after reaching an agreement on the wage issue on July 22. With the agreement, DSME immediately resumed shipbuilding operation at its largest dock to meet ship delivery schedule.
The company will open the dock during the regular summer break from July 23 to Aug. 7.
DSME could face hefty penalties if it misses the delivery deadline.
The near two-month-long strike is estimated to have caused 784.5 billion won ($599 million) losses, turning the government hard-line on the shipbuilder under state management from multiple bailouts by flagging the possibility of letting it go bankrupt.
DSME has been under state lender Korea Development Bank (KDB) over the past 22 years since its first bailout during the 1998 Asian financial crisis. As much as 11.8 trillion won worth state fund has been injected to shipyard to keep it afloat amid a global shipbuilding slump for the last decade.
The state lender which failed to privatize the shipbuilder through multiple flops in sale including the last plan to merge it under Hyundai Heavy Industries due to opposition from European Union antitrust regulator has outsourced consulting to reorganize the company.
DSME’s debt ratio has soared to 523 percent as of March from 379 percent three months earlier. A company is deemed near default crisis if debt ratio exceeds 400 percent.
The company reported a consolidated operating loss of 1.55 trillion won on sales of 4.87 trillion won last year. Despite an increase in orders this year, it has failed to make a profit in the first quarter due to spike in material prices.
Cumulative losses amounted 7.75 trillion won over the past 10 years.