A crisis began escalating at Daewoo International ― the trading and overseas resource development arm of POSCO ― Wednesday following rumors that CEO Jeon Byeong-eal would quit in protest of the parent firm’s asset restructuring plan.
POSCO officials declined to comment in the day, saying they would issue a statement after a decision regarding his status was made.
According to industry sources, Jeon uploaded a message on the internal corporate board in May that he had sent an email to POSCO chairman Kwon Oh-joon expressing his objection to a plan to sell the firm’s 51 percent stake in a gas field off the western coast of Myanmar.
In addition, Jeon criticized the strategic direction of POSCO’s asset restructuring plans, saying that unhealthy assets have to be put on sale first, local newspapers quoted corporate insiders as saying.
Shares of Daewoo International have slid for the past week, affected by concerns that POSCO may sell the gas field.
POSCO headquarters in Seoul
Jeon’s writing came after Kwon launched an emergency management reform committee on May 14 to improve financial health at the group level. The group chairman made it clear that every affiliate could be subject to restructuring.
The committee reportedly reviewed the sale of profitable assets, including the Daewoo-owned Myanmar gas field, and decided to sell it faster than unhealthy assets at a competitive price.
However, complaints at Daewoo International about the asset disposal plan have been mounting.
Company officials have developed strong attachments to the Myanmar project since they invested for 10 years to hit a jackpot in the untapped territory.
The gas field, where production started in 2014, is its most profitable business.
The profits form the Myanmar gas field made Daewoo International the most profitable affiliate of the steel-making group in 2014.
According to company data, its yearly operating profit surged 136.7 percent to 376 billion won ($339 million) in 2014. The profit from the gas field took around 70 percent of the total profits last year.
The company expects to earn 300 billion won to 400 billion won per year before tax over the next 25 years, based on the gas reserves.
“Talks about the sale of the gas field deepen the sense of deprivation of employees at Daewoo International,’’ a company insider said.
POSCO took over Daewoo International in 2010, but has faced post-integration issues with the new affiliate, including the relocation of Daewoo headquarters from Seoul to Songdo, Incheon, in February.
Pressed by growing attention over internal strife at POSCO, the group chairman made a sudden decision on Wednesday to replace Cho Chung-myong, the head of POSCO’s Value Management Department, the control tower for restructuring, to take responsibility for leaking confidential information.
By Seo Jee-yeon (jyseo@heraldcorp.com)