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World’s top three shipbuilding companies in South Korean called for over 20,000 layoffs this year, and this may just be the beginning.
Korea Labor Institute anticipated that by the end of 2016, there could be a loss of around 40,000 more positions in Hyundai Heavy Industries Co., Samsung Heavy Industries Co., and Daewoo Shipbuilding & Marine Engineering Co.
Korea Offshore & Shipbuilding Association reported that even the shipbuilders’ employment decreased from 183,000 to 163,000 people in the end of June.
Korea Labor Institure’s Senior Researcher, Bae Kiu-sik, reported almost 70% of layoffs are subcontractors.
Korea Institute for Industrial Economics & Trade researcher, Hong Sung-in, stated that if this trouble remains unsolved around next year, this could persists longer.
The turmoil during the previous six quarters for big three shipbuilders amounted to 6.6 trillion won or $5.8 billion. Contributing factors to the loss are reduced demand for shipping platforms used in deep sea drilling and postponement of deliveries.
Hyundai Heavy will report on its third-quarter earnings on Wednesday, and Samsung Heavy the next day. There is no official announcement on when Daewoo will report. The companies’ accounts will show their latest financial health.
Hyundai Heavy made a first half profit despite cutting off 1,500 jobs. On Wednesday at 9:51 A.M., the company shares fell by 3.5 percent.
Samsung Heavy will sell 159.1 million new shares in November, resulting to the company raising more than 1 trillion won. According to a spokesman, reducing 40% of its workforce by 2018 is part of the company’s restructuring plan. The company shares decreased by 2.7 percent.
Daewoo looks into cutting off 1,000 jobs by the year end. Job cuts by transferring operations will also be done by the company in another 2,000 positions. A company spokesman said cutting may continue if losses carry on following the 2015’s biggest annual loss. The deficit is due to overlooking offshore projects’ delivery schedules. Before trading suspension in July, Daewoo already had 12 percent decline in shares.
Each shipbuilder has its own restructuring plan, but includes cutting jobs, selling non-core assets, and shutting idle yards. In combination, their recovery solutions amount to 8.41 trillion won. The reconstitution will be a support for the shipbuilders if demand remains weak. Forecast showed 2018 may bring back demand at its average level.
It appears South Korea is not alone in the crisis since Singapore-based Keppel Corporation and Sembcorp Marine Ltd. cut jobs as well. The reason for layoffs in the companies is the poor demand for oil exploration and transportation equipment.
Keppel Corporation cut 8,000 offshore and marine business positions, whereas Sembcorp claimed to have slashed as many as well. The layoffs occurred through September in nine months.