KAI approaches demise as various scandals continue to weigh it down
As a result, overseas orders are being canceled and the company is struggling to find investors. Even worse, the top CEO position, which should be managing the crisis, has been vacant for more than a month.
“There have been movements where investors have asked to return their investment as quickly as possible or said they will no longer offer loans,” said a high-ranking official at the company. “There are already talks surfacing among employees on whether the company could be faced with bankruptcy.”
The official said because the company is not a conglomerate with subsidiaries that could provide needed capital, it is having trouble securing the necessary funding. Prosecutors raided the company’s headquarters in South Gyeongsang province and its office in Seoul last month, as the company was suspected of inflating the cost of the Surion, a utility helicopter, for illicit gains.
A week after the raid, the company’s CEO Ha Sung-yong resigned. Since then, the seat has remained vacant.
The company is also accused of manipulating its accounts, which surfaced during the investigation by the Financial Supervisory Service. The Korean credit rating company NICE Investors Service said it has listed KAI for a possible downgrade. As of Aug. 21, the balance on the company’s corporate bond is 600 billion won ($533 million) and commercial paper is 350 billion won.
“In order for the company to pay off investors, it will need to resolve the uncertainty related to the prosecutors and the financial authorities’ investigations,” said Kim Sang-hoon, an analyst at Shinhan Investment Corp.
In fact, since the investigation, all Surion deliveries and exports scheduled for the second half have come to a halt. The company’s stock, which was worth more than 70,000 won per share earlier this year, has plummeted to 43,350 won. The corruption scandal is also expected to harm the company’s pursuit of a 38 trillion won U.S. Air Force contract to replace 350 outdated training jets.
As the crisis grew, the company has entered a self-rescue plan. On Wednesday, its labor union visited the Blue House to deliver a statement asking the government to penalize those who are guilty but to prevent the company’s from a further downward spiral. Also, to prevent the company’s stock value from falling any further, its executives have started to buy back company stocks.
Scholars and those in the defense industry have voiced their support for the company.
On Thursday, the Korea Society for Aeronautical and Space Sciences held a workshop including panels discussing the achievements involved in developing the Surion.
The Defense Ministry also plans to invite industry experts later this month to a discussion on Surion’s flaws and the problems surrounding the local defense industry. The result of the discussion will be shared with related institutions.
The chamber of commerce in South Gyeongsang province, where KAI’s headquarters are located, has sent a statement to the Blue House, Ministry of Trade, Industry and Energy as well as the Ministry of Land, Infrastructure and Transport asking the government to help normalize KAI’s management.
“On top of the regional economy in Geoje and Tongyeong struggling due to the difficulty the ship industry has been faced with [as a result of restructuring], 100 or so of KAI’s business partners around Sacheon and Jinju may also be impacted [by the crisis],” said an official of the South Gyeongsang province commerce representative.
In order to normalize KAI’s management, some experts suggest first naming a new CEO. But it is likely to take time before a new CEO is named, as the company’s largest stakeholder, the Export-Import Bank of Korea with a 26.4 percent stake, is under evaluation by the Financial Supervisory Service.
BY LEE SO-AH [firstname.lastname@example.org]