4 trillion won bailout package for Daewoo revival taken off the table

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4 trillion won bailout package for Daewoo revival taken off the table

The government has pulled out of a 4 trillion won ($3.5 billion) bailout package for troubled Daewoo Shipbuilding & Marine Engineering until the company delivers a stronger recovery plan coupled with union support.

High-level finance officials met behind closed doors at the west annex building in the Blue House on Thursday to find ways to salvage the country’s second-largest shipbuilder from overwhelming debts, sources familiar with the affair confirmed.

Attendees included the Blue House’s senior secretary for economic affairs Ahn Jong-beom, Finance Minister Choi Kyung-hwan, Financial Services Commissioner Yim Jong-yong and Financial Supervisory Service Gov. Zhin Woong-seob.

The participants reportedly agreed to put the bailout package on hold until the company comes up with stronger measures for its revival, such as more cuts in the workforce, and seeks a formal agreement with unions on the renewed plan.

“We will send a request to Daewoo today to arrange a new plan for restructuring and get an agreement from unions,” said an official from the Korea Development Bank, a creditor of the company.

“The company’s current plans for restructuring seemed to not be enough [for the government],” the official said. “The latest increase in bonuses for senior employees, which soured public opinion of the company, was also a factor in postponing the bailout package.”

On Sept. 24, Daewoo’s management agreed in wage negotiations with unions to offer a 9 million won bonus for each employee in return for freezing the base salary.

The offer, which industry insiders say was more than twice the industry average, provoked public outrage, as the company had announced more than 3 trillion won in operating losses in the second quarter this year.

Currently, Daewoo is planning to cut about 30 percent of its 1,300 senior-level, white-collar workers. An attempt to sell several company properties, including a golf club called Sunning Point Country Club, is also ongoing, a company employee said.

“We’ve almost completed disposing of our properties and are planning to sell the remaining half of our shares in Doosan Engine, after selling 54 percent of our shares recently,” the employee said.

To avoid a repeat of the Daewoo problem, the FSC has announced a detailed plan to invest 4 trillion won in an organization specializing in restructuring private companies inside Uamco, a private firm involved in managing non-performing loans.

BY KIM HEE-JIN [kim.heejin@joongang.co.kr]
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