[Yang Nak-gyu's Defense Club] COVID-19 Has Also Breached Defense Companies

[Asia Economy Reporter Yang Nak-gyu] Defense companies are also facing an emergency as they have been breached by the novel coronavirus infection (COVID-19). Weapon maintenance work has come to a complete halt, and with some employees of partner companies infected with COVID-19, disruptions in parts supply have become inevitable.

According to the defense industry on the 27th, one employee of the defense company STX Engine located in Changwon, Gyeongnam, was confirmed positive for COVID-19 on the 25th. STX Engine has instructed all 800 employees to work from home and is conducting disinfection of the building. The employees' work-from-home period is until the 1st of next month. However, if the COVID-19 situation prolongs, it is expected to cause disruptions in the military follow-up logistics support projects handled by STX Engine.

STX Engine is responsible for maintenance of German MTU engines on naval vessels as well as outsourced maintenance of K-9 self-propelled howitzer engines. The Navy equips MTU engines on frigates (FF) and patrol combat corvettes (PCC). If STX Engine is unable to operate its factory for an extended period due to COVID-19, it will inevitably affect naval power. The same applies to frontline artillery forces. The military has been deploying the K-9 self-propelled howitzer since 2000. Currently, more than 500 units are deployed at the frontline. The K-9 howitzers deployed in the early stages of deployment are due for outsourced maintenance, but if the COVID-19 situation continues, maintenance schedules may be disrupted.

As local infections spread, controls on employees residing in the Daegu and Gyeongbuk regions have also been strengthened. LIG Nex1 has blocked employees living in Daegu from entering the Gumi factory and switched them to work from home. LIG Nex1’s Gumi factory produces core weapon systems of our military, including the surface-to-air guided missile Cheongung, Hyungung (anti-tank guided missile), tactical ship-to-land guided missiles, and local air defense radars.

Not only in Daegu and Gyeongbuk but also defense companies in Seoul are on alert. On the 25th, tension arose at the Hanwha Building headquarters in Janggyo-dong, Seoul, where Hanwha-affiliated defense companies are concentrated. This was because an outsourced partner employee who may have come into contact with a COVID-19 confirmed case visited Hanwha Solutions, located on the 21st and 22nd floors. Accordingly, Hanwha Solutions announced work-from-home for headquarters employees from that day until the 28th and conducted office disinfection. About ten companies, including Hanwha defense affiliates in the same building, also began establishing countermeasures that day.

The defense industry is concerned that if COVID-19 infections spread and cause disruptions in weapon system production, it could lead to decreased sales and even penalties for delays. Delay penalties refer to penalty amounts deducted from the contract amount when a contractor fails to fulfill contractual obligations such as delayed delivery of goods to the state.

An official from a defense company said, "The spread of COVID-19 is directly related to national security, so each defense company will devise countermeasures, but the government must also establish measures for damage investigation of defense companies and for delay penalties."