The Hanwha Systems labor union has raised concerns, claiming, “The burden from the U.S. Philly Shipyard has affected the reduction in their performance bonuses.” Despite growth in the defense sector, Hanwha Systems’ net profit has turned to a deficit, and the union argues that losses from the overseas shipyard are translating into reduced bonuses for workers.

The Hanwha Group Labor Union Council (hereinafter the “Hanwha Labor Council”) held a press conference on May 11 in front of Hanwha Building in Jung-gu, Seoul, condemning the group’s refusal to engage in dialogue and calling for the fulfillment of joint demands and formal negotiations.

On that day, as unions from affiliates including Hanwha Ocean and Hanwha Total raised issues regarding deteriorating safety and working conditions, the Hanwha Systems union cited the operational burden of Philly Shipyard as a possible reason for the decline in the bonus payout rate.

Lee Seong-jong, chairman of the Hanwha Systems union, said, “Despite growth in the defense sector’s performance last year, the bonus payout rate for 2026 has declined,” adding, “It must be made clear how the operational funding burden and loss absorption from Philly Shipyard have influenced the group’s evaluation, financial indicators, and bonus calculations.”

In fact, Hanwha Systems’ consolidated revenue for the first quarter of this year stood at 807.1 billion won (approximately $549 million), a 17% increase compared to the same period last year. Expanded exports of the Cheongung-II air defense system to the Middle East and the KF-21 mass production program drove the external growth.

Profitability, however, fell short of expectations. Operating profit came in at 34.3 billion won, a mere 1.9% increase year-on-year, falling below market consensus. The company recorded a net loss of 95.8 billion won, turning to a deficit.

The performance slowdown reflected the impact of losses from Philly Shipyard. The other business segment, which includes Philly Shipyard, recorded an operating loss of 48.1 billion won in the first quarter of this year, with the deficit widening.

The union is particularly challenging the structure under which Hanwha Systems shares the burden of Philly Shipyard. Philly Shipyard is a commercial vessel construction facility on the U.S. East Coast, an asset acquired by Hanwha Group to expand its presence in the North American shipbuilding and defense market.

However, industry observers note that the business connection to Hanwha Ocean, which is pursuing U.S. naval vessel maintenance, repair, and overhaul (MRO) operations and the expansion of special vessel exports, is relatively stronger. For this reason, questions are being raised internally as to why Hanwha Systems, whose business structure is centered on defense and ICT, is bearing the shipyard’s burden alongside Hanwha Ocean, the shipbuilding affiliate.

The union argues that Philly Shipyard’s losses have affected the group’s evaluation and finances, ultimately leading to a reduction in the bonus payout rate. Workers who have delivered results in their core business are being made to absorb the costs of risks from an overseas shipyard through reduced bonuses and cost-cutting measures, it contends.

At the press conference on that day, union chairman Lee Seong-jong argued, “When workers produce results, the company grows, but when the company absorbs losses from other businesses, workers’ bonuses are cut,” adding, “In this kind of structure, the company has no grounds to demand performance from its workers.”

Chairman Lee also said, “Even though Philly Shipyard is an asset directly tied to the shipbuilding business, Hanwha Systems was made a party to the equity acquisition and is bearing the burden,” and that “actual on-site business cooperation is taking place with Hanwha Ocean.”

The company, on the other hand, views the acquisition of Philly Shipyard as a long-term investment aimed at entering the U.S. shipbuilding and defense market. Its strategy is to combine Hanwha Systems’ naval combat system and sensor technologies with Hanwha Ocean’s shipbuilding capabilities to respond to future opportunities in the U.S. naval vessel sector and the MRO market.

The company also drew a clear line against the union’s claims. A Hanwha Systems official stated, “Performance bonuses are calculated based on the results of financial and non-financial targets directly tied to the business, in accordance with the individual evaluation criteria set by the company,” and added, “Since evaluation is based on standalone results rather than annual consolidated performance, it is not linked to the consolidated results of Philly Shipyard, which is a subsidiary.”

The official further explained, “It is true that Hanwha Ocean’s role on-site is relatively larger at the moment, but Hanwha Systems’ role in the area of key naval systems will grow going forward.”

Meanwhile, the Hanwha Labor Council announced on that day that, citing the group’s continued failure to respond to its joint demands, it would begin rally activities in front of Hanwha Building and is also considering the launch of a cross-enterprise union.

Source:Business Korea