Subcontract workers’ strike at Daewoo Shipbuilding & Marine Engineering (DSME) has ended. With huge business losses caused by the strike, how to bring the company back to normal is being discussed again. According to many experts, to sell it as a whole is the best option for blocking further losses at the company that has been ownerless for 22 years and consumed taxpayers’ money amounting to 12 trillion won. But if this option proves infeasible, they say the shipbuilder's units need to be separated to facilitate its disposal, according to BusinessKorea.
The state-run Korea Development Bank (KDB), the largest shareholder in the shipbuilder, is accelerating its disposal attempt. The bank is in possession of 55.7 percent of DSME and has managed it since 1998. The bank attempted to sell DSME in 2008 but failed due to the global financial crisis at that time and the same failure has repeated several times.
Until recently, the South Korean government’s plan was to sell it with enough time after concentrating on returning it to normal. However, the government is likely to pick up some speed with the 51-day strike having highlighted the company’s poor financial conditions.
DSME’s operating loss amounted to 1.7546 trillion won in 2021 and 470.1 billion won in the first quarter of this year. Its debt ratio rose by 144.12 percentage points to 523.16 percent in that quarter. This year’s operating loss is estimated at 500 billion won or so and it may increase to 900 billion won if the impact of the strike is reflected. The shipbuilder’s cash equivalents were 1.4413 trillion won at the end of March. However, it must repay 2.728 trillion won within one year. In short, it is incapable of standing on its own.
According to experts, a merger with Samsung Heavy Industries can be a way of privatization. “South Korea currently has three major shipbuilders but two is better in terms of investment efficiency,” said former DSME president Jung Sung-leep, adding, “Given the large size of DSME, divide and sell can also be considered, such as selling its LNG carrier, merchant ship and defense divisions to different acquirers.”