In an effort to create a sense of urgency for change, Hyundai Heavy Industries, the world’s largest shipbuilder, is moving toward a generational shift in its ownership.

Last Thursday, the shipbuilder promoted Chung Ki-sun, the eldest son of its largest shareholder Chung Mong-joon, as a vice president, while drastically cutting back its number of executives by 31 percent, or 81 out of 262. 

The reshuffle came two months after Choi Kil-sun, a company veteran and former CEO, returned as the firm’s new chairman with a clear mission of turning the shipbuilder around.

“With the promotion, the 32-year-old junior Chung, who currently works as a general manager at the firm’s business planning team, will get more closely involved in the decision-making process in management from Jan. 1 next year,” a company official said.

It has yet to be decided what kind of responsibilities the junior Chung will take up in his new post.

Industry watchers said that regardless of exactly what he would be doing, the promotion was mainly about appearances, as the move reflects the senior Chung’s determination to get the shipbuilder back on track ― not to mention showing his clear concerns about the future.

Despite his young age, the younger Chung has been trained for a manager role in a rigidly systematic manner. He entered Hyundai Heavy Industries in 2009, but left the firm in 2010 to receive an MBA degree at Stanford University in the U.S.

He returned to the company in June last year, after a two-year career at Boston Consulting Group in Seoul.

Industry watchers said the gradual transition to third-generation ownership at Hyundai Heavy will accelerate organizational changes needed to restore the struggling shipbuilding giant.

The global shipbuilder, which has been suffering a continued business downturn since 2008, felt a strong sense of crisis when the company posted a record quarterly operating loss of 1.11 trillion won ($1.05 billion) in the second quarter, mainly on account of its failure to complete mega offshore facility construction projects on time. It also tends to attract low-margin orders that have been eating into its profit.

The shipbuilder also faces Chinese rivals armed with cheap labor.

Conflict with labor is another concern for Hyundai Heavy’s management. The union, which had not gone on strike for almost two decades, has refused to negotiate with the management this year, claiming that the company has interfered in its vote for deciding whether to stage a walkout.

“There are multiple factors challenging Hyundai Heavy’s business as it faces a continued business slump in its core shipbuilding and offshore sectors,” Daeshin Securities said in a recent report.

By Seo Jee-yeon (jyseo@heraldcorp.com)