KDB chair sees future for DSME
The head of the state-run Korea Development Bank said on Monday that the cash-strapped Daewoo Shipbuilding and Marine Engineering has a good chance of staying afloat, although it is too early to tell whether the global shipbuilding industry has recovered enough to sustain its revival.
“Daewoo Shipbuilding and Marine Engineering has a good chance of revival,” said Lee Dong-geol, the chairman of Korea Development Bank, the main creditor of the financially troubled shipbuilder based in Geoje, South Gyeongsang. “Losses from offshore plant projects have been mostly resolved and the company is trying to gain a competitive edge through downsizing.”
Offshore plant projects were one of the main factors that pushed Daewoo Shipbuilding and Marine Engineering to near insolvency, say industry insiders. According to a former ship engineer, Korean companies won a number of offshore plant projects despite lacking the relevant technology, often outsourcing significant parts of projects that required technical know-how to other companies. This led to a delay in delivery as well as sudden changes in projects, leading to losses.
Lee cited downsizing as the priority in the shipbuilder’s survival.
Creditors, led by the Korea Development Bank and Export-Import Bank of Korea, agreed in April to approve a new bailout plan to keep the troubled shipbuilder afloat. The bailout plan included a fresh cash injection worth 2.9 trillion won ($2.6 billion) and corporate restructuring.
“Daewoo Shipbuilding turned a profit during the first half [of this year], but this could be just temporary,” said Lee. “Orders are on the rise in the [global] shipbuilding industry but we will have to wait and see if this will continue for a long term.”
After turning black in the first quarter, the company eventually racked up a net profit of 888 billion won from the first six months of this year.
Lee also said landing more deals is another key to the revival of the company. He said the bank is willing to provide a refund guarantee without delay if necessary.
“It’s premature to become optimistic [about the prospect of the industry], given the value of orders remains low,” Lee added.
Given the healthy comeback of the shipbuilder, however, the local stock exchange is reportedly mulling over the possibility of resuming trading of the company.
Daewoo Shipbuilding stocks have been suspended since July last year after it was found that the company has falsified its books. According to local reports, the Korea Exchange may resume the trading as early as this month.
“Saying Daewoo Shipbuilding and Marine Engineering must be killed to revive Korean shipbuilding industry is an unwarranted claim,” Lee explained. “The company is trying to stand on its own feet through various measures, including expanding the size of the self-rescue plan [that entails the reduction of employee salaries and company assets].”
Regarding the possibility of the sale of Daewoo Shipbuilding, Lee said it will work in line with government policy, which could include industry-wide restructuring.
BY CHOI HYUNG-JO [email@example.com]