By Park Jin-hai
The government is expected to intervene in the restructuring of steelmaker POSCO to prevent the company from following in the footsteps of the local shipbuilding industry.
Government officials say as steel is also a backbone industry along with automobiles, shipbuilding and IT, pre-emptive and defensive measures are required for early normalization.
POSCO said it will accelerate efforts to shut down money-losing businesses and keep exploring ways to achieve soundness. However, it seems evident that this cannot be done using existing tools.
Strategy and Finance Minister Choi Kyung-hwan ordered POSCO to undergo the largest-ever restructuring and vowed the government will actively step in to make it happen.
“Many shipbuilding and steel making companies faced with the global oversupply issues have reached their limits. Without immediate change, they could hamper other businesses,” Choi said in a recent meeting with the heads of local private think tanks. “We will have all political policies so that structuring process could be working.”
The government has begun launching task forces to support business restructuring.
The government said it will “take measures when they are needed,” meaning that the government can intervene in the market at any time, according to officials.
POSCO Chairman Kwon Oh-joon said the local steel giant has been consistent in retiring unprofitable business units as part of its strategy to overcome financial difficulties.
In line with that perspective, POSCO said it plans to cut the number of affiliates to half by 2017, while shedding off 30 percent of its none-core overseas businesses.
Chairman Kwon also stressed that the company will take additional measures if necessary.
While POSCO has seen some progress in restructuring, the pace was missing earlier targets. Data from the Financial Supervisory Service (FSS) showed that POSCO only sold its advertisement unit Poreka during the third quarter of this year.
Six other affiliates were separated as either it lost control after POSCO Plantec was put on a workout program, or because special purpose companies such as EPC Investment were closed.
POSCO refuted claims that its restructuring efforts were slow saying that; “The company’s restructuring process is ongoing according to schedule.”
POSCO said it sees another tough year for 2016 and some market watchers say the government will minimize its intervention in the steel company.
“Although it is meaningful that the government offered guidelines for the industry, already individual companies have been fully recognizing the problem and have been working to settle the issue,” said an official.