Sharing the burden

The ruling and opposition parties have united in their calls for corporate restructuring. The ruling Saenuri Party has suggested forming a multipartisan council with the government to map out a restructuring agenda. Kim Chong-in, head of the Minjoo Party of Korea, offered to cooperate if the government draws up the blueprint. Ahn Cheol-soo of the People’s Party also suggested the president, government and legislature should work together.

Although agreeing on a common goal, they differ in the means and details. Various differences in addressing layoffs, pain-sharing and bailouts through tax funds need to be ironed out through political compromise. The future of the economy and Korea Inc. depends on their cooperation and agreement.

Restructuring is most urgently needed in the shipping sector. Shipping, along with shipbuilding, has been hit hard by a prolonged global slump. Sales have dipped while charter fees have surged. Cargo operators have stayed afloat entirely through debt. Hyundai Merchant Marine and Hanjin Shipping have 4.8 trillion won ($4.2 billion) and 5.6 trillion won in debt each. Both sought debt workout arrangements with creditors.

Voluntary workout is an arrangement where creditors extend the life of an ailing company by rescheduling debt. The company usually offers creditors management control and self-rescue pledges, including sales of personal and corporate assets. Hanjin made the decision to seek a workout without prior consultation and approval from its main creditor, the Korea Development Bank (KDB). It is suspected of trying to make a pre-emptive move to avoid a sale of personal assets. KDB snubbed the request, saying the company lacks any sincerity or will in its cost-cutting and self-rescue efforts.

The former chairwoman of Hanjin Shipping, Choi Eun-yeong, and her offspring sold all of their shares in Hanjin Shipping, worth 2.7 billion won, a day before the shipper announced it would seek a workout. Share prices of Hanjin Shipping fell 7.5 percent on Friday, the day after its board approved seeking a bailout. Regulators are investigating if inside information triggered her family to dump shares.
Whatever the reason, it doesn’t look good that the Hanjin family deserted a sinking ship.

Restructuring in the shipbuilding industry is estimated to lead to at least 20,000 laid off. No one can fully compensate for the pain and loss of the workers, who aren’t likely to go along with restructuring if employers and major shareholders are as insensible as those of Hanjin Shipping. Without sacrifices from employers and shareholders, corporate restructuring cannot proceed, even with hard-won political consensus and endeavors.

JoongAng Ilbo, April 25, Page 30