By Choi Sung-jin
In order for Hyundai Merchant Marine to regain its global competitive edge, it is essential the government and shareholders make massive investments in the shipping company.
That was the conclusion of a report on the troubled shipping operator by its U.S. consultant, AT Kearney.
Accepting the advice, the government is considering injecting a large amount of funds _ 1.4 trillion won ($1.23 billion) in its shipbuilding fund and more _ into HMM and other shipping firms. It will unveil a policy package to revive the shipping industry on Oct. 31, officials said.
"To normalize the operation of Hyundai Merchant Marine and enhance the competitiveness of the shipping industry, we need to invest money in far greater sums than what is in the shipbuilding fund," an official said.
The AT Kearney consulting report, which will be completed in mid-November, reportedly focuses on the company's decline in cost competitiveness, replenishment of vessels, improvement of financial structure and changes in cargo terminal operations and the takeover of some terminals.
According to creditors and government officials, the gist of the report is about how to restore cost competitiveness. As the consulting company sees it, HMM is paying excessive charterages and container rental fees given its financial situation, and is incurring unnecessary costs because of undue price differences between its own vessels and charter ships.
AT Kearney thinks HMM needs to strengthen its competitiveness by owning more of its vessels and terminals, which requires financial support from the government and shareholders, including the state-run Korea Development Bank as its largest shareholder.
HMM should start with taking over visible and invisible assets owned by Hanjin Shipping that are on the sales block, industry watchers said.
For instance, Hanjin Shipping has recently shown an intention to sell its 54-percent stake in Total Terminals International, which its U.S. affiliate operates in the Port of Long Beach, Calif., as well as its operating rights of the shipping route to the U.S., and HMM is actively considering taking them over.
Based on the advice of AT Kearney, the government plans to turn HMM into a supersize flag carrier. "At stake is how to raise money," an official said. "The cash of 1.4 trillion won in the fund that was originally aimed at building more ships will likely fall far short of meeting the need to rebuild the shipping industry."
The government's policy package on Oct. 31 will include a bold restructuring plan of the shipping sector and raising sufficient financial resources for it, the official added.
In order for Hyundai Merchant Marine to regain its global competitive edge, it is essential the government and shareholders make massive investments in the shipping company.
That was the conclusion of a report on the troubled shipping operator by its U.S. consultant, AT Kearney.
Accepting the advice, the government is considering injecting a large amount of funds _ 1.4 trillion won ($1.23 billion) in its shipbuilding fund and more _ into HMM and other shipping firms. It will unveil a policy package to revive the shipping industry on Oct. 31, officials said.
"To normalize the operation of Hyundai Merchant Marine and enhance the competitiveness of the shipping industry, we need to invest money in far greater sums than what is in the shipbuilding fund," an official said.
The AT Kearney consulting report, which will be completed in mid-November, reportedly focuses on the company's decline in cost competitiveness, replenishment of vessels, improvement of financial structure and changes in cargo terminal operations and the takeover of some terminals.
According to creditors and government officials, the gist of the report is about how to restore cost competitiveness. As the consulting company sees it, HMM is paying excessive charterages and container rental fees given its financial situation, and is incurring unnecessary costs because of undue price differences between its own vessels and charter ships.
AT Kearney thinks HMM needs to strengthen its competitiveness by owning more of its vessels and terminals, which requires financial support from the government and shareholders, including the state-run Korea Development Bank as its largest shareholder.
HMM should start with taking over visible and invisible assets owned by Hanjin Shipping that are on the sales block, industry watchers said.
For instance, Hanjin Shipping has recently shown an intention to sell its 54-percent stake in Total Terminals International, which its U.S. affiliate operates in the Port of Long Beach, Calif., as well as its operating rights of the shipping route to the U.S., and HMM is actively considering taking them over.
Based on the advice of AT Kearney, the government plans to turn HMM into a supersize flag carrier. "At stake is how to raise money," an official said. "The cash of 1.4 trillion won in the fund that was originally aimed at building more ships will likely fall far short of meeting the need to rebuild the shipping industry."
The government's policy package on Oct. 31 will include a bold restructuring plan of the shipping sector and raising sufficient financial resources for it, the official added.
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