By Nam Hyun-woo
POSCO Engineering is seeking to lay off some 600 employees under a voluntary retirement scheme in a bid to streamline its corporate governance.
This accounts for more than half of the entire workforce of 1,000. Industry insiders say the company will start accepting resignations Oct. 4.
The move came after the company's profitability dropped amid decreasing orders in plant projects across the world. According to the firm's financial statement, it posted an operating loss of 23.7 billion won ($21.47 million), after recording 8.36 billion won in operating profit a year earlier.
Along with downsizing, the company will withdraw from its businesses in general construction, hydropower, ocean, environment and civil engineering to improve its profitability. In a meeting between management and labor on Thursday, the company revealed the plan to its employees.
The move comes as part of POSCO Group's bid to restructure its business portfolio. The group is reportedly tapping into various plans on how to deal with its engineering unit, such as putting it up for sale or merging it with POSCO E&C. POSCO E&C holds a 95.56 percent stake in POSCO Engineering.
POSCO Engineering, previously Daewoo Engineering, was acquired by POSCO in 2008. After the acquisition, the company posted sound numbers by winning massive overseas contracts, but it became unprofitable as losses occurring on some projects ― such as building a plant in Indonesia in 2012 ― were reflected in last year's figures. In May, a domestic credit rating house, Korea Ratings, lowered the company's rating from A- to BBB+.
Amid the unrest, POSCO Engineering employees blame POSCO Group's management for leading the company to this point, saying the group has been parachuting in under-qualified leaders since it acquired Daewoo Engineering.
Market observers say POSCO Engineering's fate will be decided as early as the end of this year, after consultation and board meetings.
POSCO Engineering is seeking to lay off some 600 employees under a voluntary retirement scheme in a bid to streamline its corporate governance.
This accounts for more than half of the entire workforce of 1,000. Industry insiders say the company will start accepting resignations Oct. 4.
The move came after the company's profitability dropped amid decreasing orders in plant projects across the world. According to the firm's financial statement, it posted an operating loss of 23.7 billion won ($21.47 million), after recording 8.36 billion won in operating profit a year earlier.
Along with downsizing, the company will withdraw from its businesses in general construction, hydropower, ocean, environment and civil engineering to improve its profitability. In a meeting between management and labor on Thursday, the company revealed the plan to its employees.
The move comes as part of POSCO Group's bid to restructure its business portfolio. The group is reportedly tapping into various plans on how to deal with its engineering unit, such as putting it up for sale or merging it with POSCO E&C. POSCO E&C holds a 95.56 percent stake in POSCO Engineering.
POSCO Engineering, previously Daewoo Engineering, was acquired by POSCO in 2008. After the acquisition, the company posted sound numbers by winning massive overseas contracts, but it became unprofitable as losses occurring on some projects ― such as building a plant in Indonesia in 2012 ― were reflected in last year's figures. In May, a domestic credit rating house, Korea Ratings, lowered the company's rating from A- to BBB+.
Amid the unrest, POSCO Engineering employees blame POSCO Group's management for leading the company to this point, saying the group has been parachuting in under-qualified leaders since it acquired Daewoo Engineering.
Market observers say POSCO Engineering's fate will be decided as early as the end of this year, after consultation and board meetings.
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