STX Offshore Offers Voluntary Retirement to Cut Costs
South Korea’s financially troubled shipbuilder, STX Offshore & Shipbuilding is planning a further downsizing of its operations. Once part of one of the largest shipbuilding groups, the company has struggled in recent years and is again saying that it is desperate to lower costs.
According to reports in the Korean media, workers at the shipyard, which had employed 1,500 people in 2017, have been protesting the company’s mandatory unpaid leave program in place for the last two years. As many as half of the yard’s remaining 500 employees have been forced at times to accept unpaid leave prompting the workers to go on strike this spring. In mid-June, all production work at the yard was suspended.
Faced with a shrinking order book with just seven ships to be completed and no new orders, STX announced that it was again offering voluntary buy-outs for employees during the next month. No specific number was announced for the number of employees the company was seeking to accept its offer.
STX said that it needs to further lower its operating costs if it is to remain competitive. It said despite previous restructuring efforts the number of orders and profitability had been hard hit forcing additional restructuring. According to the Korean media, STX reported a more than 80 percent decline in profits in the first quarter versus last year.
Founded in 1967, the shipbuilding group had grown to include international operations but was later forced to downsize through a series of restructuring which also brought it under the supervision of the Korean Development Bank (KDB). In May 2016, the yard filed for court receivership, but by mid-2017 it had made progress in its economic recovery plan and managed to meet its debt payment schedule.
The recovery was short-lived and in April 2018, KDB the yard's main creditor put forward a plan to put the yard under court receivership. KDB later withdrew its proposal accepting a self-rescue plan from STX that included an agreement with its union for a 75 percent cut in labor costs through voluntary retirement, outsourcing, and a reduction in employee benefits.