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Hyundai Heavy Industries Plans to Cut 2,000 Jobs

HHI
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By MarEx 2016-04-21 21:44:40

On Thursday, South Korea's Yonhap news agency reported that Hyundai Heavy Industries plans to cut about 2,000 positions this year, roughly 10 percent of its workforce. 

The move is part of planned "self-help" measures intended to bring the company's overhead in line with reduced sales volume. 

Hyundai is the world's largest shipbuilder by order backlog, but its sales fell 40 percent year on year in the first quarter of 2016. It posted a loss of more than one billion dollars last year due to falling order volume and delivery delays initiated by buyers.

The firm already reduced staff by 1,500 last year by offering employees a generous buyout package. 

Separately, the South Korean government is preparing to intervene in oversupplied industries – including shipbuilding – if they cannot successfully restructure on their own. 

"We are working to analyze which segments should be included on the list of restructuring," an official told Yonhap. "After the results come out, we will map out detailed plans."

Low oil prices have depressed demand for offshore rigs and vessels, and Korean builders face stiff competition from Chinese yards for what contracts remain for other vessel classes. Overall, the South Korean shipbuilding orderbook has fallen to its lowest level more than a decade. Most of the country's major shipbuilders are connected to larger industrial conglomerates, raising the prospect of systemic risk to the South Korean economy if they should fail. 

"We can't defer the restructuring of those oversupplied and susceptible industries anymore. We should hurry up," said Finance Minister Yoo Il-ho in a news conference last week.

In rare good news for HHI and other South Korean yards, a delegation led by South Korean President Park Geun-hye will visit Iran in early May to discuss economic ties and business partnerships. HHI is pursuing a $350 million contract for three container vessels with IRISL, and others are also interested in new opportunities in the reemerging Iranian market.