SHI replaces top executive after projecting loss

Nam Joon-ou

Samsung Heavy Industries on Monday named Nam Joon-ou to replace Park Dae-young as chief executive after Park resigned to take responsibility for the company’s recent decline in performance.

Last week, the shipbuilder projected it would post 490 billion won ($450 million) in operating loss this year and another 240 billion won in losses the following year.

The company said that it would try to generate 1.5 trillion won in cash next year by issuing new stocks in order to alleviate the financial burden.

The loss was largely due to lack of demand for new ships in the global market last year. While the company hoped to ink $5.3 billion in orders last year, it only managed to win $500 million worth of contracts.

Samsung Heavy also failed to reach its turnaround goals. The company planned to reduce its 14,000-member work force by 40 percent under a cost-cutting plan crafted last June, but as of last week, only 700 workers have left the company.

Analysts interpreted last week’s announcement as Samsung Heavy’s intent to take a “big bath” and install a new chief executive to replace Park.

A big bath refers to a strategy of reflecting accumulated losses, and even potential losses, in the current income statement to ultimately make next year’s earnings look better.

The write-off often takes place when CEOs are to be replaced, as the company can put the blame for bad results on the former head and take credit for all upcoming improvements.

Nam, 59, has spent most of his 34-year career at Samsung Heavy overseeing construction and quality management at shipbuilding sites.

With the company in such dire straits, analysts expect Nam to pursue turnaround efforts soon after his inauguration.

Samsung Heavy said Monday that it is also finalizing its annual reshuffle of top executives.

BY KIM JEE-HEE [kim.jeehee@joongang.co.kr]