Formal contract signed to create mega shipbuilder in S. Korea

By Lim Chang-won Posted : March 8, 2019, 17:24 Updated : March 8, 2019, 17:24

[Yonhap Photo]

SEOUL -- A formal contact to create a mega shipbuilder through the merger of two top shipyards in South Korea was signed after riot police formed a tight human barricade with shields to thwart a desperate charge by hundreds of angry shipyard workers.

At the Seoul head office of Korea Development Bank (KDB), the contract was signed Friday by KDB chairman Lee Dong-gull and Kwon Oh-gap, vice chairman of the holding company of Hyundai Heavy Industries (HHI), the world's largest shipbuilder.

Violent scuffles erupted when more than 1,000 riot police stopped hundreds of workers from Daewoo Shipbuilding & Marine Engineering (DSME) from charging into the KDB building.

Through a complicated process of equity conversion or transfer, the shipyards of HHI and DSME will be run under the same roof of a new corporation.
Policymakers think the two shipbuilders can acquire the world's best technology and know-how, achieve economies of scale, and increase productivity by sharing technology, design, parts and services.

In a joint statement, Kwon and Lee promised to ensure an autonomous management system for DSME, saying job security would be ensured "as long as productivity is maintained." They also promised to maintain DSME's existing partnerships with suppliers and component companies with external competitiveness.
 

[Yonhap Photo]

Lee has ruled out any massive layoffs, but workers fear redundancies in overlapping business sectors. The two shipyards have already lost more than 30,000 jobs in a government-initiated campaign that began four years ago to restructure South Korea's shipbuilding industry.

Under its wing, the new entity will control four shipyards -- Hyundai Heavy, Daewoo Shipbuilding, Hyundai Samho Heavy Industries and Hyundai Mipo Dockyard. Vice President Lee Seong-geun was named as DSME's new CEO.

The merger followed years of painful restructuring in South Korea's embattled shipbuilding industry, which has suffered from dwindling orders, a prolonged business slump and a strong challenge from Chinese shipyards.

With a massive injection of state money estimated at 10 trillion won ($8.79 billion), DSME has been kept afloat in return for a sweeping rehabilitation program. The shipbuilder finally turned a profit in 2017. Initially, experts proposed that DSME should separate its defense section or merge with competitors, but policymakers have refused to do so, fearing a backlash from politicians, provincial government officials and voters.
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