Seoul floating the idea of letting DSME go bankrupt if strike does not end

2022.07.22 14:01:02 | 2022.07.22 14:26:56

[Photo by Yonhap]이미지 확대

[Photo by Yonhap]

South Korean government and state lender are floating the idea of letting deficit-stricken Daewoo Shipbuilding Engineering & Marine Engineering (DSME) go bankrupt if shipyard contract workers do not end the months-long strike that has been amplifying losses for the shipbuilder currently under state management.

DSME’s subcontract workers staging a sit-down strike for over 50 days and facing an unofficial ultimatum have offered to end the strike if DSME drops the plans to file civil and criminal lawsuits against protesters and demand compensation for losses from dockyard disruption from illegal striking.

On Friday, DSME shares fell 1.46 percent to 20,250 won, as of 11:56 a.m. in Seoul.

The two parties reached an agreement on the wage issue on Wednesday, with workers yielding their demand for a 30 percent hike in base wage to accept a 4.5 percent raise offered by the management.

The union has significantly retreated from its hard-line stance after the government threatened to use force and flagged the possibility of bankruptcy. DSME`s management also vowed to take legal actions as the sit-down strike is estimated to have caused losses of 32 billion won ($24 million) a day, or 784.5 billion won so far.

The management fears it could be held responsible for breach of duty as it is more or less a public entity due to tax-financed bailouts of 11.8 trillion won.

“The company had repeatedly accepted all the demands in the past even after contract workers illegally occupied dockyards, but we cannot go on complying with their demands every time,” said a DSME official, who asked to remain unnamed.

An official from the labor ministry said the government cannot dissuade an employer from pursuing a damage suit when losses are too large.

The metal union to which the subcontract workers belong reportedly has a budget of 59.4 billion won for this year, which comes to 196 million won per day. The court fining of 3 million won so far has worked as little threat to end the strike.

Authorities, in turn, have begun to play hardball. State-lender Korea Development Bank is said to have floated the idea of letting DSME go bankrupt.

DSME’s debt ratio hit 546.5 percent as of March 31, 2022, jumping from 390.7 percent at the end of 2021. If not for rollover or additional rescue from the state lender, the shipbuilder would go bankrupt as its debt ratio exceeds 400 percent.

The shipbuilder reported an operating loss of 470.1 billion won in the first quarter after incurring 1.75 trillion won in operating loss and 1.7 trillion won in net loss for the full year of 2021. Cumulative net loss over the last 10 years amounted to 7.7 trillion won.

DSEM has been under state management since 2000, receiving bailouts of 11.8 trillion won amid a lengthy slump in the shipbuilding industry.

The Korean government planned to merge the nationalized shipbuilder with Hyundai Heavy Industries but it flopped due to the opposition from the antitrust authority of the European Union.

By Choi Seung-gyoon, Kim Hee-rae, Moon Gwang-min and Cho Jeehyun

[ⓒ Pulse by Maeil Business Newspaper &, All rights reserved]