Hyundai Heavy Industries is highly likely to push for massive layoffs amid a prolonged recession in the global shipbuilding sector and the government’s move to restructure the ailing industry.
Over the past few weeks, the troubled world’s No. 1 shipbuilder is rumored to be planning an additional cut of 3,000 employees -- most likely from its production line -- in the form of voluntary retirement programs. The firm already cut around 60 executives in April and around 1,500 office workers last year.
Ships under construction in the dry dock at the Hyundai Heavy Industries Co. shipyard in Ulsan. Yonhap
The company’s spokesperson denied rumors of an imminent layoff plan, but told The Korea Herald by phone, “We are considering diverse ways to streamline the business although nothing has been confirmed.”
The speculation came as Hyundai Heavy -- along with two other shipbuilding giants Samsung Heavy Industries and Daewoo Shipbuilding & Marine Engineering -- has continued to see weak ship orders in the sluggish shipbuilding market globally.
Hyundai Heavy posted losses during nine straight quarters until the fourth quarter of 2015. Although it turned around in the first quarter this year, it was mostly driven by oil-refining and engine sectors and not from its main shipbuilding business. The company gained only three ship orders -- two tankers and one liquefied petroleum gas ship -- through April this year. The situation of the other two shipbuilding giants is no better.
Amid the continued weak business performance, Hyundai Heavy also faces mounting pressure from the government, which has shown its strong willingness to accelerate restructuring of the three money-losing shipbuilders.
On April 20, Finance Minister Yoo Il-ho hinted the government’s willingness to take the leadership in industry’s restructuring, saying, “We will accelerate the push for layoffs,” in the shipping and shipbuilding industries.
A week later, KEB Hana Bank’s chief Ham Young-joo visited Hyundai Heavy’s headquarters in Ulsan to call on the shipbuilder’s head Kwon Oh-gap to prepare for restructuring measures to counter possible further deterioration of the industry. The main creditor bank has lent around 1.2 trillion won ($1 billion) to the shipbuilder.
Ham’s visit is seen as a follow-up measure after financial authorities mapped out plans on restructuring the troubled shipbuilding giants. On April 26, the Financial Services Commission had both Hyundai Heavy Industries and Samsung Heavy Industries submit self-help plans to their main creditors.
Market watchers said even if the massive layoff takes place, it would not be radical or in a coercive way due to strong resistance from the labor union and huge economic impact on Ulsan City, home to the shipbuilder.
The city, which is located in southeast Korea, has already been hit hard by the sluggish shipbuilding industry. The number of the jobless has soared to 9,400 in the first quarter of this year, more than 18 percent rise from the same period last year, according to the latest data from Labor Ministry.
Strong resistance from the militant labor union will also be a major obstacle to the massive layoff. The shipbuilder’s union, which belongs to the Korean Metal Workers’ Union, said it would soon begin protests, opposing the possible layoffs and calling for a wage rise.
By Shin Ji-hye (shinjh@heraldcorp.com)
