Hyundai Heavy shareholders OK split-up plan amid harsh labor opposition
Shareholders of Hyundai Heavy Industries Co. on Friday approved the company’s split-up plan for a merger with a small local shipbuilder amid fierce opposition from its labor union.
The split is the first step in the process of Hyundai Heavy’s proposed merger with Daewoo Shipbuilding & Marine Engineering Co.
In March, Hyundai Heavy signed a deal worth an estimated 2 trillion won (US$1.6 billion) with the state-run Korea Development Bank (KDB) to buy Daewoo Shipbuilding. The bank is the largest shareholder of Daewoo Shipbuilding, with a controlling 55.7 percent stake in the company.
With the shareholders’ approval, South Korea’s largest shipbuilder will be divided into a subholding company and a reorganized Hyundai Heavy Industries, which will carry out its shipbuilding and offshore businesses, next month.
Hyundai Heavy workers have been strongly opposing the plan, claiming the split forces the newly born Hyundai Heavy to inherit massive debts that will lead to massive restructuring, including job cuts.
The company has claimed that even after the split-up, the company will guarantee job security.
Since mid-May, the shipyard’s unionized workers have been launching partial and full-scale strikes in defiance of the split-up plan. They also have been occupying the venue of the shareholders meeting since Monday.
Despite earning shareholders’ approval over the union backlash, Hyundai Heavy still has a long way to complete its merger with Daewoo Shipbuilding.
The company should get regulatory approval from antitrust authorities, starting with Seoul’s antitrust watchdog. It also has to pass the merger review process from some 10 countries, as well as the European Union, since the tie-up of the two major shipyards could reshape the global shipbuilding industry
According to industry data, Hyundai Heavy had an order backlog totaling 11.14 million compensated gross tons (CGTs) in 2018, the largest among rivals. The comparable figure for Daewoo Shipbuilding was 5.84 million CGTs. Their combined order backlog accounts for 21.2 percent of the total around the globe.
If the takeover goes ahead, Hyundai Heavy Industries Group will have four shipbuilders under its wing — Hyundai Heavy, Hyundai Samho Heavy Industries, Hyundai Mipo Dockyard and Daewoo Shipbuilding.
The completion of the merger will also restructure the local shipbuilding market into a duopoly, with Hyundai Heavy sharing the sector with Samsung Heavy Industries Co.