Since 2015, 4.1 trillion won in Korean taxpayers’ money has been put into Daewoo Shipbuilding and Marine Engineering (DSME) to keep the ailing company afloat, but it will be sold off to Hanwha Group for no more than two trillion won, which is less than half of the public money spent on it.
The proceeds from the sale of DSME’s new shares will be used to normalize the shipbuilder, which is in immediate need of money as its debt ratio reached 379 percent on a consolidated basis at the end of last year.
Hanwha will acquire DSME at a price that is one-third of the level it offered 13 years ago. In 2008, it tried to take over DSME by investing more than 6 trillion won, but gave up the acquisition bid due to the global financial crisis.
This time, Hanwha was initially interested in the special ship unit of DSME’s defense industry division. However, the special ship unit and the merchant ship unit share shipbuilding docks, so it is difficult to distinguish assets. Furthermore, the local community around DSME’s dockyard was opposed to splitting the shipbuilder. Then, KDB recommended Hanwha to take over the whole company.
However, Hanwha is faced with many tough challenges. DSME incurred a loss of 1.75 trillion won on a consolidated basis in 2021 and its debts total 8.4 trillion won. Furthermore, the macroeconomic environment is rapidly deteriorating due to global inflation and the continuing Ukraine-Russia war.
DSME’s shipbuilding facilities and equipment are in need of improvement, which requires steady funding. “DSME needs to invest in the development of eco-friendly next-generation engines to sharpen its competitive edge against chasing Chinese shipbuilders,” an industry insider said.
Reestablishing a relationship with the labor union is also a burden for Hanwha. The group may have trouble in negotiating wage hikes and welfare benefits with DSME unionists. On hearing news about Hanwha’s takeover of DSME, the DSME branch of the National Metal Workers’ Union reacted strongly. It expressed opposition in a statement, describing KDB’s stake sale as a “one-sided, closed-door deal that gave special favors to Hanwha.”
Source: BusinessKorea
