DSME Submits New Self-Rescue Plan


By MarEx 2016-05-20 21:12:56

On Friday, Daewoo Shipbuilding & Marine Engineering submitted a new self-rescue plan to its creditors with a proposal for further payroll cuts and for facility closures. 

The plan includes a proposal to turn its defense business into an affiliate in order to raise funds for its operations. 

"It is likely that the defense division is separated into a subsidiary before being listed on the stock market," a company official told Yonhap. DSME does not intend to sell that business asset at present. “Given that the defense business unit isn’t provided with separate facilities and shares equipment with other shipbuilding departments, it is technically difficult to put it on sale,” the firm said.

Samsung Heavy Industries submitted a debt restructuring and self-rescue plan on Tuesday, but saw it rejected by top creditor Korea Development Bank. “We will ask [SHI] to include measures that involve liquidity support from Samsung Group as we judged that voluntary cost-cutting and fund-raising efforts from Samsung Heavy Industries are makeshift,” a KDB official said.

With self-rescue plans now public from all three of the biggest South Korean shipbuilders, many are concerned about an upcoming wave of layoffs towards the end of this year – cuts of as many as 6,000 positions, rising into the tens of thousands due to effects on suppliers and contractors. Ha Chang-min, an official at the sub-contractors’ labour union for Hyundai Heavy Industries, told Today that he expects 10,000 workers to lose jobs this year as projects end. The industry as a whole employs 200,000 people. 

Daewoo has already been acting to lay off more than 2,000 employees and to sell non-core assets. Hyundai Heavy Industries also made a move towards recuding headcount Friday with a voluntary retirement program for up to 2,100 senior production workers.

All three of South Korea's yards posted large losses last year, a combined total of $7 billion; Daewoo contributed nearly two thirds of that loss, and while the other two yards returned to profitability in the first quarter, DSME still posted negative returns. On the upside, DSME still has a large orderbook backlog, with pending orders for 114 vessels and 7.7 million compensated gross tonnes – second only to HHI.

DSME also announced Friday that it has agreed with Sovcomflot to delay the delivery of the first Arc7 ice-class Arctic LNG carrier for the Yamal LNG project. Delivery was scheduled for June 30, but has been pushed back to January 31, 2017. Sovcomflot and DSME did not discuss the reason for the delay.