[Political Affairs Committee Report] Kang Seok-hoon "Daewoo Shipbuilding and others' management normalization progressing smoothly"

[Image source=Yonhap News]

[Asia Economy Reporter Yoo Je-hoon] Kang Seok-hoon, Chairman of KDB Industrial Bank, said on the 28th, "We will proceed smoothly with the management normalization of major restructuring companies such as Daewoo Shipbuilding & Marine Engineering and Asiana Airlines."

Chairman Kang attended the National Assembly's Political Affairs Committee briefing held at the National Assembly in Yeongdeungpo-gu, Seoul, and stated, "Amid an unstable external environment and increasing uncertainty due to high inflation, high exchange rates, and high interest rates, concerns about an economic recession are deepening. As a representative policy financial institution, we are making our best efforts to fulfill our role."

Currently, the companies undergoing restructuring efforts by KDB are ▲ Korean Air-Asiana Airlines ▲ Daewoo Shipbuilding & Marine Engineering ▲ Ssangyong Motor, among others. In the case of Korean Air-Asiana Airlines, since the decision to pursue integration at the end of 2020, the Korea Fair Trade Commission conditionally approved it in February, but there has been little progress for nearly two years. In particular, among the nine countries where approval from competition authorities is essential, the United States, European Union (EU), China, and Japan are still reviewing the merger.

Accordingly, on the 4th, KDB sent materials explaining the background and necessity of the integration to overseas competition authorities and requested active cooperation from related ministries such as industry and foreign affairs to conclude the project. Furthermore, KDB plans to encourage Korean Air, the acquiring entity, to submit materials and negotiate remedial measures with overseas competition authorities.

Daewoo Shipbuilding & Marine Engineering is also one of KDB’s biggest challenges. Although the overall shipbuilding industry is experiencing a favorable trend, the integration with Hyundai Heavy Industries was finally canceled earlier this year, and the management environment remains difficult. Steel prices have nearly doubled compared to 2020, labor costs have risen, and overall cost increases are hampering progress. Recently, losses amounting to 800 billion won have occurred due to strikes and occupations by subcontractor unions, making the crisis ongoing.

KDB has been conducting management consulting to strengthen competitiveness and enhance independent survival capabilities for Daewoo Shipbuilding since the previous chairman’s tenure. KDB plans to promptly complete the consulting, including the impact of the strikes, and based on this, establish a mid- to long-term management plan through consultations with creditors, the government, and other key stakeholders.

In the case of Ssangyong Motor, the acquisition and merger (M&A) process by KG Group is underway. After being selected as the final acquirer, a rehabilitation plan has been submitted to the court, but the trade creditors are opposing the low repayment rate of the rehabilitation claims (approximately 7% cash repayment rate). KDB stated, "Before the creditors' meeting for the approval of the rehabilitation plan, it is necessary for Ssangyong Motor and KG to seek ways to improve the repayment rate to persuade the creditors."

Meanwhile, KDB plans to expand financial support for companies’ energy efficiency and decarbonization of existing industries to achieve carbon neutrality, and invest 21 trillion won, an increase of 1 trillion won from the previous year, in innovative growth sectors to secure future growth engines. Additionally, KDB will continue financial support for the smooth landing and recovery of companies affected by COVID-19, as well as support in global and investment banking (IB) sectors and youth-related projects.