Heavy Industries-Infrastructure-Bobcat 'Backbone' Preserved by Doosan... Speed of Self-Restructuring Plan Implementation Is Key

On the 27th, the Doosan Tower building in Dongdaemun-gu, Seoul, is visible as the government decided to inject 1.6 trillion won into Doosan Heavy Industries, which is experiencing financial difficulties, through the Korea Development Bank and the Export-Import Bank of Korea. Photo by Kang Jin-hyung aymsdream@

[Asia Economy Reporter Ki-min Lee] Doosan Group, which submitted its final self-rescue plan to creditors, is analyzed to have preserved the core framework of the group connecting Doosan Heavy Industries & Construction, Doosan Infracore, and Doosan Bobcat. Although it has escaped the sandwich situation of management difficulties and pressure for a self-rescue plan, allowing some breathing room, the sale of Doosan’s business units and some affiliates, as well as restructuring of Doosan Heavy Industries & Construction, are inevitable, making the speed of implementing the self-rescue plan a key factor in management normalization.

According to Doosan Group and financial circles on the 28th, the core of the final self-rescue plan submitted to the Export-Import Bank of Korea and the Korea Development Bank the previous day includes ▲ participation of the parent company, Doosan Corporation, in the capital increase of Doosan Heavy Industries & Construction ▲ sale of non-core assets ▲ reduction of various costs ▲ business structure reorganization. Through this, Doosan plans to secure more than 3 trillion KRW and improve the financial structure of Doosan Heavy Industries & Construction to a strict level, aiming for early management normalization. With the submission of the final self-rescue plan, the support funds Doosan Heavy Industries & Construction will receive from policy banks amount to approximately 800 billion KRW.

Doosan has not disclosed the detailed contents of the final self-rescue plan, but various speculations are emerging in the market based on the 'big picture' revealed the previous day. First, a plan is underway for Doosan Corporation and major shareholders, including Doosan Group Chairman Park Jung-won, to publicly sell more than 51% of Doosan Solus shares, which include management rights, for about 800 billion KRW. The sale of the group’s headquarters building, Doosan Tower, and private contributions from the controlling family are also strongly mentioned. Doosan Heavy Industries & Construction, the party facing management difficulties, has declared restructuring its business structure toward gas turbines and renewable energy, and is reportedly proceeding with the sale of subsidiaries such as Doosan Mecatec. Although Doosan Heavy Industries & Construction denies it, reducing the scale of business units such as coal-fired power and nuclear power is also strongly mentioned. The annual order amount for coal-fired and nuclear power dropped from 9.0534 trillion KRW in 2016 to 4.188 trillion KRW last year, and some idle workforce layoffs and additional restructuring reviews support this.

Accordingly, it is evaluated that the major affiliates connected through Doosan Heavy Industries & Construction, Doosan Infracore, and Doosan Bobcat can be preserved. Initially, in the financial investment industry, there was speculation that Doosan Group, suffering from severe management difficulties, might sell Doosan Heavy Industries & Construction to Korea Electric Power Corporation. However, Infracore and Bobcat are 'cash cows' that can endure until management normalizes and have steady performance, so it seems Doosan has not given up on them. Last year, on a consolidated basis, their sales and operating profit were 8.1858 trillion KRW and 840.4 billion KRW respectively, accounting for 44% and 67% of Doosan Group’s total sales and operating profit last year. A business circle official said, "Since Doosan Group plans to secure 3 trillion KRW, it seems unlikely that the sale of Infracore and Bobcat will be considered."

Doosan states that the submission of this final self-rescue plan has laid the foundation for management normalization, but the speed and timing of implementing the plan are analyzed to determine the achievement of management normalization. Even after adding the 1.5868 trillion KRW support funds previously received from creditors, the current 800 billion KRW support funds, and the extension of loan maturities from domestic commercial banks, the borrowings Doosan Heavy Industries & Construction must repay this year remain in the low 1 trillion KRW range. Since the creditors’ support is not free, it remains as debt that Doosan Heavy Industries & Construction must repay in the future.

This content was produced with the assistance of AI translation services.