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HHI split is approved despite opposition

Union claims it will lead to layoffs, but shareholders vote ‘yes’
June 01,2019
이미지뷰
Workers of Hyundai Heavy Industries supporting management, left, face union workers in front of Hanmaeum Center in Ulsan Friday, where the shipbuilder’s shareholder meeting was supposed to take place. As the workers had occupied the center since the day before, the shareholder meeting was moved to the University of Ulsan’s stadium. [NEWS1]
Shareholders of Hyundai Heavy Industries (HHI) approved the splitting of the company on Friday, which is the first step towards the acquisition of Daewoo Shipbuilding & Marine Engineering (DSME).

The vote was successful despite determined and vigorous opposition from the union.

According to the company, 99.9 percent of voters attending the shareholder meeting, which was held at the University of Ulsan, voted in favor of the proposal to split the shipbuilder into two companies: Korea Shipbuilding & Offshore Engineering (KSOE), an intermediate holding company, and Hyundai Heavy Industries, the operating company.

The company said that, of the total 70,773,116 HHI common shares, votes were cast for 51,074,006 shares, or 72.2 percent.

“The split off is a decision that was made to maximize HHI’s capacity and value through the merger with DSME,” HHI CEO Han Young-seuk said.

With the split, the shipbuilder will now have four affiliates - HHI, DSME, Hyundai Mipo Dockyard and Hyundai Samho Heavy Industries.

HHI said the new intermediate holding company will be responsible for investment and financial support for its affiliates as well as future technology R&D.

The new operating company, maintaining the HHI name, will be focused on businesses such as shipbuilding, offshore plants and engine development.

The approval of the shareholders was already expected as the National Pension Service, the second-largest owner of HHI shares, decided to approve the split.

HHI Holdings owns 30.95 percent of HHI, NPS 9.35 percent and KCC 6.6 percent.

The shipbuilder said it will now be taking the next step, applying for approval of the DSME merger by the Fair Trade Commission, next month.

HHI and DSME had a combined global market share last year on vessel orders of around 21.2 percent.

In March, HHI signed a 2.2 trillion won ($1.8 billion) share swap deal with state-owned Korea Development Bank to acquire 55.7 percent of DSME. Under the agreement, KDB will be the second-largest shareholder of the newly-launching KSOE with an 18 percent stake.

Despite the unanimity, the shareholder meeting was anything but smooth.

The location of the meeting was changed after the workers occupied Hanmaeum Center in Ulsan, where the shareholder meeting was to take place. The center was barricaded with motorcycles.

A total of 1,500 workers of HHI and an estimated 5,000 members of Korean Metal Workers’ Union, including those from Hyundai Motor, gathered in Ulsan since Thursday in protest of the meeting and the merger with DSME.

Even when the meeting was moved to the university campus, the workers stormed and trashed the site, breaking windows and smashing holes in the walls.

The shipbuilder’s union argued that the decision to split the company and the inclusion of DSME as one of HHI Group’s affiliate would lead to layoffs.

The workers claim that, as a result of the split, the operating company, which employs the shipbuilding workers, will inherit more than 7 trillion won of debt.

This will be used as grounds for laying off additional workers, they claim.

“HHI debt will increase 95 percent, which will inevitably lead to restructuring, including a cutback on the workforce,” said Kim Hyung-gyun, the HHI union spokesman, adding that HHI has been cutting back on workers over the past four years.

The union has argued that corporate restructuring is inevitable since the businesses of HHI and DSME overlap.

HHI has claimed that the new operating company will not be burdened with the entire debt as the intermediate holdings company will be also taking responsibility as agreed with the KDB.

HHI said that, as the shareholder meeting is now over, it will focus on repairing trust with workers and strengthening the company’s competitiveness.

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]