Daewoo Shipbuilding Subcontractor Labor and Management Keep the Last Line... Leaving 'Compensation for Damages' Issue Unresolved (Comprehensive Report 2)

Subcontractor Labor-Management Agreement Reached After 51 Days of Total Strike... Major Issues Remain Unresolved
Damage Estimated at 800 Billion Won... Compensation Issues May Trigger Further Aftershocks
Union Prepares to End Occupation and Disband

[Image source=Yonhap News]

[Asia Economy Reporter Jeong Dong-hoon] The subcontracted labor union and management of Daewoo Shipbuilding & Marine Engineering (DSME) reached an agreement 31 days after occupying Dock 1 at the Okpo Shipyard. It has been 51 days since the strike began.

The government's strong determination against the illegal strike, consideration of police intervention, and comprehensive pressure including the creditor KDB Industrial Bank's bankruptcy scenario card were seen as effective factors. Both labor and management made some concessions due to the crisis awareness that it could lead to mutual destruction, but the biggest issue in the negotiations, the claim for damages, was not agreed upon and remains a task.

Although the labor-management negotiations were settled, DSME will bear damages estimated at a minimum of 800 billion KRW, and the credibility of K Shipbuilding has been significantly damaged, so the aftershocks are expected to be considerable.

◆ 51 days leaving only scars: "Strike damages estimated at 800 billion KRW" = The subcontracted labor union and management concluded negotiations around 1:30 p.m. on the 22nd after several recesses and resumptions. They agreed on a 4.5% wage increase. Additionally, they promised to pay 500,000 KRW for Lunar New Year and Chuseok holiday bonuses and 400,000 KRW for summer vacation bonuses. They partially agreed on employment succession for union members who worked at closed workplaces but did not disclose specific details.

Kwon Soo-oh, chairman of the in-house partner company at DSME, stated, "This is a matter of national interest, and I apologize to the public, all DSME employees, and their families for the fact that DSME, the lifeline for all related companies, has been halted for 51 days." He added, "The strike lasted 51 days, which felt like 51 months to me, and we have been negotiating day and night for 22 days to reach this tentative agreement."

Hong Ji-wook, vice chairman of the Metal Workers' Union of the Korean Confederation of Trade Unions (KCTU), said, "Fortunately, although late, we have resolved this serious situation and reached a tentative agreement smoothly, and we report this to the public. It was truly a heart-wrenching situation, and I declare the complete approval of the ratification vote."

Earlier, the Geoje, Tongyeong, and Goseong subcontracted shipbuilding branches of the KCTU Metal Workers' Union went on strike from the 2nd of last month, demanding a 30% wage increase and recognition of full-time union officials. From the 18th of last month, they began a sit-in protest occupying Dock 1 at the Okpo Shipyard. Occupying a dock where ships are under construction is illegal under the Enforcement Decree of the Labor Union Act.

The dock is where ships are built and launched. If this area stops, work on other production lines such as painting, piping, and welding is delayed, causing serious damage to the shipbuilding industry, where meeting construction deadlines directly affects performance. This is also why previous shipbuilding strikes did not escalate to dock occupations. The Okpo Shipyard Dock 1 currently occupied by the union is the world's largest, equivalent to the size of nine soccer fields, capable of constructing four ships simultaneously.

Four ships are under construction here, but the launching of an oil tanker scheduled for last month has been indefinitely postponed. To launch a ship, the dock must be filled with water, but the union's occupation prevents seawater from being filled. Accordingly, the damage from this strike is estimated to reach about 800 billion KRW. The management estimates daily sales losses of 25.9 billion KRW and fixed cost losses of 5.7 billion KRW.

[Image source=Yonhap News]

◆ "We will all perish if this continues" ? united by crisis, but... = Both sides announced that they failed to reach an agreement on the biggest obstacle in this negotiation: the issue of damages during the strike, i.e., civil and criminal immunity. Initially, management was concerned that not holding the illegal strike accountable could set a bad precedent and mentioned the possibility of prosecution for breach of trust. On the other hand, labor argued that claims for damages are a malicious tool used by employers to suppress workers and demanded that this issue be dropped. Ultimately, the unresolved issue of compensation for damages caused by the strike was left behind in the tentative agreement, raising concerns that it could ignite further conflict.

DSME has been experiencing increasing operating losses over the past five years due to a sharp decline in orders and rising steel prices. Last year, operating losses reached 1.7547 trillion KRW, and the first quarter of this year recorded 470.1 billion KRW in operating losses. The discussion of bankruptcy scenarios by the Industrial Bank arose because prolonged strikes amid worsening performance could jeopardize normal debt principal and interest repayments.

After harsh restructuring over several years, there are no remaining assets to sell, and if the strike continues longer, it will be difficult to withstand liquidity deterioration without additional loans from creditors. According to the Industrial Bank and DSME, the total losses from sales, fixed costs, and delay penalties due to the strike are estimated at 816.5 billion KRW by the end of July and expected to increase to 1.359 trillion KRW by the end of August. DSME has undergone intense restructuring since 2016 due to financial difficulties. The creditors have provided a total of 4.2 trillion KRW in support, with the Industrial Bank responsible for 2.6 trillion KRW of that amount.

Meanwhile, the KCTU Metal Workers' Union stated in a press release immediately after the tentative agreement was reached that "the subcontracted union's strike struggle to change the lives of subcontracted irregular workers ends with consensus after negotiations," but added, "The struggle is not over."

The Metal Workers' Union said, "Leading 190,000 union members of the Metal Workers' Union, along with 1 million KCTU members, progressive party members, civil society activists, religious figures, and legal professionals, we will gather this strength again to improve the treatment of subcontracted shipbuilding workers."

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