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Troubles mount for Hyundai Heavy

Shipbuilder faces challenges from union strike, low earnings, Samsung merger

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Published : 2014-09-02 20:25
Updated : 2014-09-02 20:25

Hyundai Heavy Industries faces an uphill battle as its union is set to go on strike for the first time in 19 years amid lackluster earnings.

At the same time, its competitor Samsung Heavy Industries is catching up with the world’s biggest shipbuilder in the offshore plant sector.

The union said it would down tools and seek mediators to help resolve its pay dispute with the company’s management.

The two sides have failed to negotiate on pay and incentives.

Management offered to raise wages based on productivity, but the union refused Monday.
An employee works in front of a ship under construction at Hyundai Heavy Industries’ shipyard in Ulsan. (Bloomberg)

“The company suggested the best deal in a situation in which it had suffered massive losses in the second quarter of this year. We will do our best to prevent extreme scenarios,” a company official said.

Hyundai Heavy swung to an operating loss of 1.1 trillion won ($1 billion) in the second quarter, the worst performance in the company’s history, as it set aside massive provisions against possible losses from ongoing projects. A strong won has also adversely affected its bottom line.

The company has not failed to reach a compromise with the union since 1995.

But workers claimed that their wages were lower than the industry average even as the company enjoyed brisk business over the last four years. “When Hyundai Heavy Industries was thriving, it expanded the number of affiliates instead of improving labor conditions. Now, when it is performing poorly, it is passing the buck to workers,” a labor union member said.

To make matters worse, Hyundai Heavy is about to face fierce competition with Samsung Heavy Industries, which announced a plan to merge with Samsung Engineering.

Industry sources expected that the merger would bring upheaval in the industry as the two companies aimed to generate synergy in the engineering, procurement and construction of offshore energy plants, which is also one of Hyundai Heavy’s new growth engines.

Hyundai Heavy Industries posted sales of 12.3 trillion won from shipbuilding, marine engineering and offshore plant businesses in the first half of this year.

The two Samsung units had combined sales of around 10.9 trillion won from the same businesses in the same period, according to a regulatory filing.

The merged entity seeks to achieve sales of 40 trillion won by 2020.

By Park Han-na (hnpark@heraldcorp.com)

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