Four Korean shipbuilders report KSOE for unfairly recruiting their workers

Industry

Published: 25 Aug. 2022, 17:38 Updated: 25 Aug. 2022, 17:38

Four Korean shipbuilders report KSOE for unfairly recruiting their workers

Hyundai Heavy Indsturies' shipyard dock in Ulsan, in February 2019. [HYUNDAI HEAVY INDUSTRIES]

Four Korean shipbuilding companies are planning to report Korea Shipbuilding & Offshore Engineering (KSOE), the No. 1 Korea shipbuilder and sub-holding company of Hyundai Heavy Industries (HHI) Holdings, to the Fair Trade Commission (FTC) for the alleged unfair recruitment of their own key employees.

The four competitors — Samsung Heavy Industries (SHI), Daewoo Shipbuilding & Marine Engineering (DSME), K Shipbuilding and Daehan Shipbuilding — plan to submit their argument to the antitrust agency before the end of this week.

HHI Holdings controls its shipbuilders, including HHI, Hyundai Mipo Shipbuilding and Hyundai Samho Heavy Industries, through the stakes controlled by KSOE.

KSOE owns a 78 percent stake in HHI, 42 percent of Hyundai Mipo Shipbuilding and 80.5 percent of Hyundai Samho Heavy Industries.

The dispute is unusual in that domestic shipbuilders have generally maintained friendly relations even as they responded jointly on negotiating raw material prices and overseas orders.

According to the written complaint, the four shipbuilders are accusing the shipbuilders under KSOE of approaching their key personnel and offering them better paychecks and bonuses.

However, to disguise their recruitment as legitimate, KSOE allegedly had the workers apply through public job openings.

The applicants were exempted from having to submit a resumé since they applied as experienced workers.

The four companies stressed that the shipbuilding and offshore plant industry is a technology-intensive industry that requires technical and skilled labor due to the difficulty in standardization and automation in the manufacturing process.

“HHI already took away several experienced workers in the beginning of this year,” said one of the shipbuilding companies' officials who requested anonymity. “These are not just employees that manage production, but even research and development.”

Another shipbuilder claimed that the leading shipbuilder recruited 30 or so of its technicians this year despite the employees having no reason to leave.

“Two-thirds of our employees now work for KSOE,” the company official, who also requested to be remain anonymous, said. “It takes at least five years for technicians to become skilled at their jobs. It's been difficult as a result of their absence.”

The shipbuilders claim that HHI has become more aggressive in hiring employees from rival companies this year.

The first extraction of skilled workers from rivaling companies started when HHI was trying to acquire DSME in 2019.

That was the same year that HHI created KSOE as sub-holding company for the same purpose.

But such recruitment practices continued even after the acquisition of DSME fell through on the strong opposition of the European Union, which raised concerns on the Korean shipbuilders’ monopoly of high added-value liquefied natural gas (LNG) carriers, and still after HHI signed an agreement with DSME creditor, Korea Development Bank, that HHI will not unfairly extract DSME employees in March after the acquisition failed.

A very large crude carrier (VLCC) built by Daewoo Shipbuilding & Marine Engineering (DSME) is being launched at DSME's shipyard in Geoje, South Gyeongsang, in 2019. [DAEWOO SHIPBUILDING & MARINE ENGINEERING]

The shipbuilding industry estimates that some 300 employees that used to work at SHI and DSME now work for HHI, as of the first half of this year.

The employees recruited by HHI also included researchers and designers crucial to developing LNG carriers and floating production storage and offloading (FPSO) units, which requires advanced skills.

The four shipbuilders claim that they already raised the issue with a high-ranking official at the Ministry of Trade, Industry and Energy during a conference held last month, but their complaints were not accepted.

KSOE maintains that the recruitments were legal as the employees were hired through open job posts.

The company argued that the claims by the other shipbuilders are not true and that there were no special treatments made for more experienced workers in the same field.

KSOE said the recruitment process for experienced workers was conducted with the same terms as all applicants.

It added that it will comply with the procedure in regards to the FTC complaint.

The shipbuilding industry, which was forced to undergo restructuring in 2014, has been busy hiring workers as ship orders have surged since last year as the world started recovering from the global lockdown caused by the Covid-19 pandemic.

The impact of KSOE's aggressive hiring has also spilled onto smaller shipbuilders, which are also struggling to find good workers.

Some question whether it can even be considered unfair recruitment when employees decide to move to another company that offers better conditions including higher pay.

“We can’t stop employees from moving to another company that offers better pay, and there’s a huge shortage of workers due to increasing orders,” a SME shipbuilder official said. “But there should be some left for us smaller companies to survive.”

Rhee Shin-hyung, naval architecture and ocean engineering professor at Seoul National University and president of the Society of Naval Architects of Korea, said the biggest problem is that the country dealt the issue of the lack of skilled workers in the local shipbuilding industry with shortsightedness when the shipbuilding industry was struggling.

“We should have trained people for the long-term by predicting the demand accordingly to the characteristics of industries that go through cycles [of ups and downs],” Rhee said.

BY LEE DONG-HYUN, KO SUK-HYUN [lim.jeongwon@joongang.co.kr]