Hyundai confirms spin-off plans
SOUTH Korea’s Hyundai Heavy Industries will split its non-shipbuilding businesses into separate companies to improve management efficiency as the country’s shipyards undergo massive restructuring.
South Korean shipbuilders including Hyundai Heavy Industries and Daewoo Shipbuilding and Marine have struggled with mounting losses as global demand slows and competition from Chinese rivals intensifies.
The government and creditor banks – including the state-run Korea Development Bank – in recent months have urged intense restructuring efforts including mass job cuts.
Under the plan, Hyundai will operate six separate companies to spin off the non-core equipment and construction sectors from its core businesses, including shipbuilding, offshore and industrial plants, the company said in a statement.
Its non-core divisions range from construction equipment to green energy to robotics and account for 13 percent of sales.
The shipbuilder said the spin-off was part of its restructuring plan submitted to creditors.
“There was inefficiency because our management was centred on shipbuilding and it was difficult for businesses that record smaller sales to secure individual competitiveness,” it said in a statement.
The nation’s so-called “Big Three” shipbuilders including Hyundai, Daewoo and Samsung Heavy Industries racked up collective losses of 8.5 trillion won (US$7.2 billion) last year.
They were hailed as a major driver of the country’s export-reliant economy – Asia’s fourth-largest – before being forced last year to shed thousands of jobs and assets to stay afloat.
Meanwhile shares of shipping firm Korea Line plunged as investors questioned the carrier’s ability to fund its acquisition of the assets of bankrupt giant Hanjin.
The Seoul Central District Court on November 14 chose Korea Line as the preferred bidder over Hyundai Merchant Marine for Hanjin’s USAsia route, noting it had offered better terms for the bid.
Hanjin – South Korea’s largest shipping company – filed for bankruptcy protection in August after the market suffered its worst downturn in six decades.
In addition to Hanjin’s US-Asia route, Korea Line made a bid for Hanjin’s 54pc stake in a port terminal in Long Beach, California, and offered job security for some 700 Hanjin employees. –