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Unions At HHI and DSME Protest Merger Agreement

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By MarEx 2019-02-11 18:38:57

Unions at Hyundai Heavy Industries (HHI) and Daewoo Shipbuilding and Marine Engineering (DSME) are contemplating a labor action to demand job security after the two giant conglomerates merge. The $2 billion deal would make HHI the world's largest shipbuilder and satisfy two policy objectives for South Korea: to sell its controlling stake in DSME and to consolidate the nation's "Big Three" shipyards into a stronger, more competitive "Big Two." 

At the end of January, Hyundai Heavy Industries (HHI) signed a preliminary agreement to take over DSME from the South Korean government. The complex agreement would give HHI a global shipbuilding market share of about 20 percent. “In order to fundamentally enhance the competitiveness of the industry, it is crucial to eliminate the inefficiency caused by overlapping investment under the current 'Big Three' structure,” said Lee Dong-gull, chairman of state-owned Korea Development Bank, in announcing the deal.

However, union officials are wary of this objective, as it is likely to lead to more job losses. Korea's shipbuilders have been reducing head count for years, a response to intense competition from China and a longrunning industry downturn. The dearth of work has put historically-thriving shipbuilding centers like Geoje into decline. While a recent resurgence in LNG carrier orders has brought in new revenue for the "Big Three," Korean unions do not wish to see payrolls shrink again due to the "efficiencies" of a merger. 

At HHI, union leaders called for management to give labor a seat at the table during the merger talks. “The management should apologize for closed-door negotiations, and promise the union’s participation in the takeover process,” the union said in a statement. “Labor-management relations could go from bad to worse should the management go ahead with the takeover push without guaranteeing existing jobs."

At DSME, workers will hold a vote on February 18-19 on whether to strike in protest of the merger. The two unions are coordinating, and HHI's workers could potentially join in a unified protest.