Hanwha Ocean launched amid volatile labor-management relations

The Korea Times

The Korea Times

Business

Wed, December 6, 2023 | 17:18

Companies

Hanwha Ocean launched amid volatile labor-management relations

Posted : 2023-05-23 16:53

Updated : 2023-05-24 14:47

A group of Hanwha Ocean's subcontractors stage a protest at the shipbuilder's headquarters on Geoje Island, South Gyeongsang Province, Tuesday, before the beginning of the general meeting of the company's shareholders. Yonhap

By Park Jae-hyuk

Hanwha Ocean started operating as the shipbuilding subsidiary of Hanwha Group, Tuesday, after its shareholders agreed on proposals to change its name from Daewoo Shipbuilding & Marine Engineering (DSME) and appoint new management.

By obtaining the builder of warships and submarines, Hanwha also got a step closer to its ambitious goal of becoming the Korean version of Lockheed Martin, capable of supplying defense systems covering land, sea and air. But the nation's seventh-largest business group still faces the tall tasks of handling the shipbuilder's militant labor union and repaying its enormous debts.

Last week, Hanwha Ocean's labor and management reached a tentative agreement on the payment of performance-based salaries equivalent to 300 percent of each employee's monthly wage. This enabled the company to successfully rebrand itself and replace former CEO Park Du-seon with Kwon Hyuk-ung, former Hanwha Corp. vice chairman of the support division, during the general meeting of shareholders.

But Hanwha Ocean's unionized workers are still asking for job security guarantees and for development plans for the company as well as the local community of Geoje Island, where its shipyard is located.

There is also speculation that Hanwha Ocean's union may request higher wages every year, weighing on the group's lack of experience in managing a shipbuilder.

Company management said it will reach a final agreement with the union by the end of this month, emphasizing that both sides have had enough conversations for Hanwha Ocean's future.

The new CEO also asked employees to respect each other, regardless of where they are from.

"Ocean's employees displayed their potential by fostering a world-class company on Okpo Bay, and Hanwha has grown with numerous M&As with competent companies," Kwon wrote in a letter to Hanwha Ocean employees.

A Hanwha Ocean shareholder speaks during the general meeting of the company's shareholders at its headquarters on Geoje Island, South Gyeongsang Province, Tuesday. Yonhap

In addition to the task of making a good relationship with the shipbuilder's regular employees, Hanwha Ocean's management also needs to handle the request from subcontracted workers to withdraw a 47 billion won ($36 million) lawsuit that DSME had filed against their strike last year.

The subcontracted workers even went on a demonstration at the venue for the general meeting of Hanwha Ocean's shareholders, threatening to strike unless the company accepts their request. Rep. Lee Eun-ju of the minor opposition Justice Party also held a press conference at the National Assembly that day to urge the company to withdraw the lawsuit.

"The recent delay of the date for pleading is intended for Hanwha Ocean to avoid the public attention on the unreasonable lawsuit, before its launch," a group of the shipbuilder's subcontracted workers said in a statement.

Normalizing Hanwha Ocean's financial soundness is another urgent task facing the new management.

The shipbuilder's regulatory filing showed that it suffered a 1.6 trillion won operating loss last year. In 2021, its operating loss was 1.7 trillion won. During the first three months of this year, it suffered another 62.8 billion won in operating losses.

As of the first quarter of this year, its debt-to-equity ratio reached 1,858.3 percent.

Against this backdrop, Hanwha Group Vice Chairman Kim Dong-kwan, who was appointed one of the nine new directors of Hanwha Ocean, vowed to support the shipbuilder for its earlier normalization and expansion in foreign markets.

pjh@koreatimes.co.kr