Daewoo Shipbuilding loses control in Canadian wind power plant subsidiary

By Kim Jae-won

Daewoo Shipbuilding & Marine Engineering (DSME) has lost its control in a Canadian wind power manufacturing subsidiary, as the joint venture with the Nova Scotia provincial government filed for receivership in March, company officials and the Canadian media reported Sunday.

DSME said that the shipbuilder gave up its 51 percent stake in DSME Trenton, or DSTN, as the company saw its capital decrease, hit hard by rising losses amid the global economic downturn. Its Canadian holding company posted 24.3 billion won of losses last year due to poor performance by DSTN.

“Giving up a shareholder’s rights means that we have no responsibility in this company,” said a DSME official. “Now, DSTN has nothing to do with us. Even if it is sold to a third party, we will not receive anything from it.”

According to the CBC, the plant had no customer orders as of February and was operating in maintenance mode with 19 active employees. It costs about $400,000 per month just to keep the facility open, the Canadian public broadcaster reported, quoting DSTN.

The announcement came as the shipbuilder is going through a tough restructuring program, having posted more than 5 trillion won of operating losses for the last few years due to lack of orders and failure in the marine plant business. DSME plans to submit stronger self-rescue measures to its major shareholder Korea Development Bank later this month, including massive layoffs, salary freezes, shutdown of dry docks and sales of non-core assets.

The shipbuilder also seeks to sell its American wind power affiliate DeWind as part of its restructuring plans. A local consulting firm is evaluating the company’s value. DeWind posted a 71.8 billion won net loss last year.

DSME CEO Jung Sung-leep met the company’s union leaders recently, seeking their cooperation. He explained that the company’s top priority is to survive until demand recovers.

The company suffers from a lack of new orders, having only won one order for two Suezmax tankers worth $130 million so far this year, raising worries that it may fail to achieve its annual goal of winning orders worth $10.8 billion. Suezmax is a term for the largest ship size capable of transiting the Suez Canal in a laden condition, and is almost exclusively used in reference to tankers.

According to data from the Financial Supervisory Service, DSME posted a 31.4 billion won net profit in the first quarter, turning from a 1.1 trillion won of net loss three months ago. Its sales marked 3.5 trillion won during the January-to-March period, down 9.1 percent from the previous quarter.

As the shipbuilder goes through hard times, so do the residents of Geoje Island in South Gyeongsang Province where its shipyard is located. Merchants in the southern island said their income halved recently compared to last year, as workers from the shipbuilder tighten their purse strings to brace for uncertainties.

Foreign workers in the city are also leaving the region as there is little work for them. According to data from the City of Geoje, the number of foreign residents reached 14,840 in April, down from 14,704 in March.