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STX, union fail to reach deal, likely headed back into court receivership

Apr 10,2018
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A labor union banner posted outside the STX Offshore and Shipbuilding headquarters in Changwon, South Gyeongsang, demands that the government stop pushing shipbuilders out of jobs while claiming that the local economy relies on shipbuilding. [YONHAP]
STX Offshore and Shipbuilding and its union failed to reach a decision on a proposed restructuring plan by the 5 p.m. deadline on Monday, pushing the cash-strapped shipbuilder even closer to court receivership. The company and union had an extended deadline until midnight Monday to reach an agreement.

If no deal is made, the shipbuilder will be applying for court receivership, less than a year after completing the program last July.

The labor union of the struggling shipbuilder continued to oppose a restructuring plan that was supposed to be submitted to creditors led by the Korea Development Bank by 5 p.m. on Monday.

The main proposal of the restructuring plan is to reduce fixed costs including labor expenses by 60 percent. Additionally, the company has to cut 15 billion won ($13.9 million) worth of fixed costs for more than five years in order to get the refund guarantee, which is crucial to attracting orders.

STX Offshore and Shipbuilding has been downsizing its production work force as part of its restructuring program since 2014. As a result, the number of production employees has been reduced from 1,072 to 695 as of last month, a 35 percent cut. The number of office workers has shrunk from 2,474 to 622, a 75 percent drop. However, under the restructuring plan the number of production workers has to be cut by 75 percent, which means 500 would be laid off, leaving around 200.

Last month the company agreed to accept voluntary retirement. Only 104 people applied with 40 more willing to move to an outsourcing contractor.

Those that will be moving to the outsourcing contractor will be guaranteed their jobs for three years while receiving 80 percent of their current wages.

However, unionized workers have argued that the proposal is too harsh and that it can no longer downsize the number of existing workers, adding that they are open to any discussion as long as their jobs are guaranteed.

The union has been on strike since March 26.

The main creditor Korea Development Bank previously argued that they were giving STX Offshore and Shipbuilding another chance as the company has more value in existence than liquidated, and asked the labor union to share the burden. But KDB was steadfast that if the union does not agree to the restructuring plan, it has no other choice but to ask the court to make a decision.

The KDB said the company will be filing for court receivership next week.

The government echoed the sentiment.

Finance Minister Kim Dong-yeon on Monday reaffirmed the government’s position that if the labor union fails to reach an agreement it will go forward with court receivership as planned.

“We have set the principle of normalizing the company when all interested parties - the labor union, largest stakeholder and creditors - share the burden for the sustainability of the company,” Kim said.

The Finance Minister said the government has established a principle in other companies including GM Korea and Kumho Tire. STX Offshore and Shipbuilding is no exception.


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