Less Ships, More Problems
Major Korean shipbuilders are predicted to record more than 7 trillion won (US$6.2 billion) in losses this year amid the current economic recession and slump in their offshore plant business. The amount, which is a record high, is as large as Hyundai Motor Company’s operating profits for last year. Besides, the shipbuilders are going through labor-management disputes these days, in the middle of a controversy over improper management.
According to industry sources, Daewoo Shipbuilding & Marine Engineering, Samsung Heavy Industries, and Hyundai Heavy Industries are forecast to record a combined operating loss of approximately 7.4 trillion won (US$6.5 billion) this year. The amount was about 4.7 trillion won (US$4.2 billion) in the first half of this year alone.
Daewoo Shipbuilding & Marine Engineering posted a loss of over 3 trillion won (US$2.7 billion) in the second quarter, and the amount is estimated to increase to 5.3 trillion won (US$4.7 billion) for 2015. Those of Samsung Heavy Industries and Hyundai Heavy Industries are estimated to reach 1.5 trillion won (US$1.3 billion) and 600 billion won (US$30 million), respectively.
“This year is likely to become the worst year for the three shipbuilders, as the loss of Daewoo Shipbuilding & Marine Engineering is snowballing,” said an industry insider, adding, “The losses exceed the 10-year payment capability of these companies.”
To compound the matter, the creditors of Daewoo Shipbuilding & Marine Engineering are demanding that the company hand in a self-help plan and an employer-employee agreement first before they provide financial assistance of about 4 trillion won (US$3.5 billion), signaling a bumpy road ahead for the stabilization of business.