Toward industrial restructuring

The path for Hanjin Shipping after it is placed under court receivership must be simple. A weak company must be dealt with strictly and quickly based on market principles, but nevertheless in a way that can minimize negative impact on the global economy and save the competitiveness of the shipping industry. The government held an emergency cabinet meeting and decided to have Hyundai Merchant Marine take over the assets of Hanjin Shipping.

Hyundai Merchant Marine — currently the country’s second largest cargo carrier after Hanjin Shipping — is under a normalization program led by its largest stakeholder Korea Development Bank after a creditors’ debt-to-equity swap. Hyundai Merchant Marine creditors were in favour of debt relief after the company sold off core assets. Hanjin Shipping was rejected because its self-rescue plan and support from its parent group and large shareholders fell short of expectations.

Creditors, having already seen 1 trillion won ($890 million) worth of existing and past lending go down the drain, refused to extend further assistance to Hanjin Shipping. The court could determine the company beyond rescue with debt reaching 5.6 trillion won. The idea of Hyundai Merchant Marine being able to acquire competitive assets from Hanjin Shipping would be the best solution. Shipping is an important pillar of the export-reliant Korean economy. A failed enterprise should be left to the market principles, but a key national industry must be protected.

The government must learn from this and not dither and miss-time restructuring. Vessels from Hyundai Merchant Marine must be put on Hanjin Shipping routes so that Korean shipments can be delivered on time. The government must come up with a farsighted plan to reinforce shipping competitiveness later this month.

The Hanjin Shipping case must be a tipping point to accelerate industrial reforms. The corporate sector should learn that even the top of the industry can fall. Regardless of size, a company in trouble could be kicked out when found noncompetitive.

JoongAng Ilbo, Sept. 1, Page 34