Hyundai Heavy Industries named on Monday Kwon Oh-gap, the chief executive of local oil refiner Hyundai Oilbank, as its new CEO amid lackluster earnings and labor disputes.

“The appointment reflects our will to overcome the crisis the company is facing and to make a new leap,” the company said in a statement.

The company’s decision came after it posted the worst performance in its history ― an operating loss of 1.1 trillion won ($1 billion) in the second quarter of this year.

Hyundai Heavy Industries is in a dispute with its labor union over pay and incentives. This is the first time the company has failed to reach a compromise with the union since 1995.

The incoming CEO is known as an industry veteran with a broad knowledge of shipbuilding and offshore plants, which he gained while working at Hyundai Heavy Industries, the world’s biggest shipbuilder. 

“Kwon has a good understanding not only of the company’s management but also of production, with his 30 years of experience at Hyundai Heavy,” a company official said.

“With his sincerity and expertise, we expect that he can resolve the labor crisis,” he added.

Kwon is expected to concentrate most on reforming Hyundai Heavy’s management system.

While working as Hyundai Oilbank CEO over the last four years, Kwon was recognized for his leadership as the company was the only petroleum player in the country to make a profit during the first half of this year.

The refiner also posted the industry’s highest operating profit from 2011 to 2013. Hyundai Heavy is the parent company of Hyundai Oilbank.

Last year, Hyundai Heavy Industries carried out executive-level reshuffles, promoting the company’s CEO Lee Jai-seong to company president.

But it failed to implement a responsible and ethical management system, and its earnings worsened. Lee stepped down to take responsibility.

The company’s operating margin dropped by 1.5 percent in 2013 from 15 percent in 2010 as the company sought low-cost projects amid fierce competition in the global shipbuilding sector.

Industry insiders forecast that it will be difficult for Hyundai Heavy Industries to avoid an operating loss in the third quarter of this year.

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