Fewer Orders

 

Daewoo Shipbuilding & Marine Engineering (DSME) is to reduce the amount of orders by 20 percent in the future in order to have substantial management. Also, the Korea Development Bank, the largest shareholder of the company, will directly decide whether or not to receive orders after checking propriety.

According to KDB Bank and the financial authorities on Nov. 3, KDB Bank will form a committee and discuss every new order of the DSME in the future.

The committee will issue a refund guarantee (RG) only when the estimated cost calculated by DSME is accurate, and profitability in terms of technology, law and accounting is guaranteed. The DSME’s creditors, including KDB Bank, said that the company received new orders beyond its ability, which caused the inefficiency of shipbuilding, and the offshore plant market was directly hit by lower oil prices.

In particular, the DSME will reduce the offshore plant sector most, which is considered to be the main cause of massive losses, and focus on special ships, such as liquefied natural gas (LNG) carriers, large container ships and submarines which are relatively recognized for its technology.

A senior official from the KDB Bank said, “In a bid to normalize the management of the DSME, the company should stop receiving unreasonable orders, which are focused on the expansion in size. New orders are expected to be cut by 20 percent from the existing amount of orders, and sales will reduce by 20 percent as well.” By sales of the DSME in the third quarter, it will decrease from 3.15 trillion won (US$2.78 billion) to 2.5 trillion won (US$2.21 billion).

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