[Reporter’s Notebook] Daewoo Shipbuilding & Marine Engineering Finds New Shipping Route

"Geoje is becoming a 'ghost city'."

This was said by a merchant near Ajoo-dong, Geoje-si, Gyeongnam, where Daewoo Shipbuilding & Marine Engineering's Okpo Shipyard is located, last July. At that time, Daewoo Shipbuilding & Marine Engineering subcontracted workers were occupying the dock (shipbuilding yard) demanding higher wages and continuing a 31-day protest behind 1㎥ iron cages. The streets of Geoje, once the cradle of the shipbuilding industry, were desolate. Not only was there no lively laughter, but even the sound of music from shops was absent. This was the raw reality of K-Shipbuilding, which had endured chronic deficits by squeezing production costs, especially labor costs, through subcontracting contracts. Nine months later, Hanwha's acquisition of Daewoo Shipbuilding & Marine Engineering was finally decided. After drifting 'adrift' for 22 years without an owner, can Daewoo Shipbuilding & Marine Engineering embark on a new path?

The current situation is not easy. While domestic shipbuilders with strengths in building eco-friendly ships such as LNG (liquefied natural gas) vessels are spreading their wings, management performance is worsening. Even after signing a memorandum of understanding for acquisition with Hanwha in September last year, the situation has continued to deteriorate, making urgent capital injection through a rights offering necessary. The deficit over the past two years has reached 3.4 trillion won. In the first quarter of this year, when a turnaround was expected, it is the only one among the three major shipbuilders expected to incur a large loss compared to the plan.

Workers are busily moving at Daewoo Shipbuilding & Marine Engineering Okpo Shipyard in Aju-dong, Geoje-si, Gyeongnam. [Image source=Yonhap News]

Although the Hanwha Group decided to acquire Daewoo Shipbuilding & Marine Engineering from a magnanimous perspective, the authorities sometimes became an 'obstacle.' The industry expected the Fair Trade Commission to support overseas corporate merger reviews by making an early approval decision, but the Fair Trade Commission's decision was the slowest.

Nevertheless, Hanwha's acquisition of Daewoo Shipbuilding & Marine Engineering gives hope. First, Hanwha Group, the acquiring entity, expects synergy between shipbuilding and defense industries. They aspire to grow into a global defense company equipped with an 'integrated land, sea, and air system,' encompassing not only existing space and ground defense but also maritime sectors.

The domestic shipbuilding industry has also entered a phase of 'restructuring.' Daewoo Shipbuilding & Marine Engineering, which had no owner for a long time, led the 'low-price bidding' atmosphere in the domestic shipbuilding industry. Instead of focusing on profitability, it concentrated on building many ships to increase market share. However, with a strong parent company now in place, this practice is expected to change. K-Shipbuilding, which has encountered growth opportunities during the energy transition period, is expected to show hope through the acquisition of Daewoo Shipbuilding & Marine Engineering.

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