DSME announces more layoffs and pay cuts

Daewoo Shipbuilding & Marine Engineering (DSME) unveiled additional self-rescue measures on Tuesday, including slashing payrolls and laying off workers to diminish debt.

The ailing shipbuilder, once the second largest in the world, will submit the measures to a group of its creditors led by the state-run Korea Development Bank (KDB) by the end of this week. The measures are intended to help reduce the company’s debt by 1.5 trillion won ($1.2 billion).

The company posted over 5 trillion won in losses last year.

Last October, the debt-stricken shipbuilder opted to submit self-rescue plans worth 1.85 trillion won in return for receiving 4.2 trillion won in support from its creditors.

Under the new measures, DSME will lay off 1,200 employees over the next five years and reduce salaries of both its administrative and manufacturing workforce by between 10 and 20 percent. This is the first time workers under the executive level have been affected by the restructuring.

The company has already reduced the number of executives at its headquarters from 55 to 41 and cut executives’ base salary by up to 20 percent.

All workers will be given one month of unpaid holiday starting in the second half and will also be encouraged to use up their vacation days. The company will save on overtime allowances by shutting down its shipyards on Sundays.

DSME also plans to sell some 14 subsidiaries at home and abroad by 2020 to get an injection of capital. As an initial step, it named Koramco REITs Management and Trust, an asset and real estate management firm, as the preferred bidder for its 17-story building on Namdaemun-ro in central Seoul and signed a memorandum of understanding to sell it for 180 billion won by the end of August.

The new owner of the building will lease several floors of DSME’s former building for a small number of administrative workers at the shipbuilder, who will handle its finances and sales.

DSME has already shared a draft of the plans with its creditors and Samjong KPMG, one of the creditors’ accountants.

Also on Tuesday, Samjong KPMG finished its evaluation of whether or not the company could survive worst-case scenarios - such as drastically shrinking orders, unexpected costs incurred in excess of budgeted amounts and limbo in productivity.

DSME will submit the results of that so-called stress test, scheduled to be released this week, to the main creditor KDB, which will then decide whether or not to place the shipbuilder under court receivership.

BY SEO JI-EUN [seo.jieun@joongang.co.kr]