“STX needs high-intensity self-efforts for survival. But, if it fails to make a firm commitment to have major restructuring and a business reshuffle from the management and the union within one month (April 9), it should also go into receivership by the rules,” said Finance Minister Kim Dong-yeon during a ministerial meeting.
“As for Sungdong, it is inevitable to file for receivership,” Kim added.
The plans for the two shipbuilders were based on an analysis by consulting firms over the last two months on the industrial ecosystem, company competitiveness, restructuring and business reshuffles.
STX was once the world’s fourth-largest shipbuilder, but it has seen continued losses in recent years, even after a capital injection of 6 trillion won ($5.6 billion) from the government, due to the management’s moral hazard amid a global recession in the shipbuilding industry.
Its main creditor, Korea Development Bank, views that if STX is able to cut 30 percent of its fixed costs including jobs in a month, the struggling shipbuilder has a possibility to be normalized because it still has 16 ship orders and 150 billion won in cash. But, if it fails to negotiate with its workers for further job cuts, it will end up going into receivership.
As for Sungdong, which does not have any capital or ship orders, it has no other choice but to file for court receivership, according to the government. The state has already injected 4 trillion won of support, to no avail.
“Even if the government provides additional, massive financial support, it has a very low possibility to survive due to long-term losses,” said Eun Sung-soo, president of the Export-Import Bank of Korea, the main creditor of Sungdong.
Amid continued closures of plants and dockyards, concerns have been raised about regional economies.
The government said it would map out plans to help residents in the struggling provinces. Tongyeong, South Gyeongsang Province, and Gunsan, North Jeolla Province, will be hit by the restructuring of General Motors Korea and Sungdong Shipbuilding & Marine Engineering.
The Ministry of Trade, Industry and Energy said on the day that it had set aside 240 billion won to help partner companies of GM and Sundong, employees who lost their jobs and small business owners in Tongyeong and Gunsan.
The government will also unveil mid- to long-term plans on how to recover the ailing shipbuilding and shipping industries amid continued unfavorable market conditions.
By Shin Ji-hye (firstname.lastname@example.org)