Park Jae-hyuk is a seasoned journalist who has provided comprehensive coverage of South Korea's corporate dynamics, economic policies, industry challenges and the global positioning of Korean companies. Based on the articles he has written since joining The Korea Times in 2016, his investigative approach has helped readers understand corporate governance, economic trends and business strategies shaping South Korea’s economy.
Hanwha seeks to become defense industry powerhouse after DSME takeover
Korea's first 3,000-ton-class Dosan Ahn Chang-ho submarine is on display at a launching ceremony at Daewoo Shipbuilding & Marine Engineering's shipyard in Geoje, South Gyeongsang Province, in this September 2018 file photo. Korea Times file
By Park Jae-hyuk
Hanwha Group Vice Chairman Kim Dong-kwan / Courtesy of Hanwha Group
Conglomerate confident of reassuring shipbuilder's workers
By Park Jae-hyuk
Hanwha Group's latest decision to acquire Daewoo Shipbuilding & Marine Engineering (DSME), which manufactures naval ships and submarines, has made it possible for Korea's seventh-largest conglomerate to become a top-tier global defense industry powerhouse, according to industry officials Tuesday.
Given that the group owns subsidiaries leading the solar and renewable energy markets, its planned takeover is also expected to accelerate the global shipbuilding industry's transition to green energy.
Hanwha signed a conditional deal on Monday with DSME and its largest shareholder, Korea Development Bank (KDB), to acquire a 49.3 percent stake in the shipbuilder for 2 trillion won ($1.4 billion) and said it aims to become a major global firm in both the defense and renewable energy businesses, integrating its core competencies with DSME's capabilities in design and manufacturing.
According to the business group, Hanwha Aerospace and Hanwha Systems will invest 1 trillion won and 500 billion won, respectively, while Hanwha Impact Partners will pay 400 billion won, and Hanwha Energy's three subsidiaries will pay the remaining 100 billion won, aiming to sign the main contract by the end of November.
Hanwha has shown interest in DSME for a long time. That's because Hanwha lacks a warship manufacturing unit, although it has produced self-propelled howitzers for the army and supplied radar systems and aircraft engines for the air force.
“By sharing our consumer networks in the Middle East, Europe and Asia, we expect an increase in exports of defense systems of Hanwha Aerospace and Hanwha Systems, as well as DSME's flagship 3,000-ton-class submarines and warships,” Hanwha Group said in a press release. “Once Hanwha Systems' cutting-edge maritime systems technologies are integrated with DSME's shipbuilding capacity, we will also be able to develop self-navigating commercial ships.”
The conglomerate also emphasized that its takeover will maximize synergies in the eco-friendly liquefied natural gas (LNG) business.
“Hanwha Group has already imported LNG from the U.S. and generated electricity through Tongyeong Ecopower,” the company said. “If we secure DSME's technologies for floating LNG (FLNG), LNG carriers and floating, storage, re-gasification units (FSRU), we can expand our presence in the fast-growing LNG market.”
Unionzied workers at Daewoo Shipbuilding & Marine Engineering chant during a press conference at the Korean Metal Workers' Union (KMWU) headquarters in Seoul, Tuesday, to protest Korea Development Bank's decision to sell the shipbuilder to Hanwha Group. Courtesy of KMWU
DSME union's protest
For the acquisition deal to succeed, however, Hanwha needs to overcome resistance from the DSME union.
A day after the announcement of the deal, the shipbuilder's unionized workers held a press conference calling on KDB and the government to be more prudent about selling their company to the “chaebol” or family-run conglomerate.
“Hanwha should make promises for job security and regional economic growth,” the union said.
Hanwha also faced a backlash from the DSME union when it sought to acquire the shipbuilder in 2008. Last year, the unionized workers even hindered Hyundai Heavy Industries Group from conducting due diligence, after the shipbuilding group was selected in 2019 as the preferred buyer of the debt-ridden company.
In response to such concerns, Hanwha said it will communicate with the union to create a reasonable labor-management relationship based on trust.
“We will not neglect our social responsibility as a conglomerate when investing in the nation's key industry,” the company said.
Some market observers anticipate that the DSME union may not protest strongly against Hanwha's acquisition, because the conglomerate's lack of a shipbuilding subsidiary lowers the possibility of a large-scale workforce reduction. In addition, Hanwha dispelled the union's previous worries about the warship manufacturing unit being spun off from the commercial ship operation, as it decided to take over both divisions.