Maintaining the Big 3 in Shipbuilding... "Under Private Major Shareholders, Low-Price Orders Will Decrease"

"The Issue of Order Unit Prices Is Also Affected by the Support System of KDB"

Kang Seok-hoon, President of the Korea Development Bank, is speaking at an emergency press briefing on Daewoo Shipbuilding issues held on the 26th at the Korea Development Bank headquarters in Yeouido, Seoul. Photo by Kim Hyun-min kimhyun81@

[Asia Economy Reporters Yu Je-hoon and Bu Ae-ri] With Hanwha Group selected as the preliminary acquirer of Daewoo Shipbuilding & Marine Engineering (DSME), it is expected that the domestic shipbuilding industry's Big 3 structure will be maintained. Kang Seok-hoon, Chairman of KDB Industrial Bank, stated regarding the issues of overproduction and low-price orders in the shipbuilding industry, "If a private major shareholder manages the company, the problem of declining order prices will be relatively reduced."

Chairman Kang held a press conference on the afternoon of the 26th at the Yeouido headquarters in Yeongdeungpo-gu, Seoul, and commented on the domestic shipbuilding industry's over-competition system, saying, "I think part of the problem occurred because DSME was under the support of KDB Industrial Bank to some extent."

Regarding the maintenance of the Big 3 structure, Chairman Kang explained, "Due to the failure of the merger with Hyundai Heavy Industries, it has become practically impossible for the existing companies (Hyundai Heavy Industries and Samsung Heavy Industries) to acquire DSME," adding, "The acquisition of DSME by a third strategic investor (SI) was the only way to solve this problem."

He also pointed out that the controversy over low-price orders was a problem that arose while DSME remained under the KDB Industrial Bank system, stating, "Now that a private major shareholder will manage the company, the issue of order prices will be relatively reduced, and I believe this will provide a turning point for higher quality and profitability improvement in the shipbuilding industry."

Regarding the corporate merger approval by overseas competition authorities that blocked the merger with Hyundai Heavy Industries, he said, "It is expected that corporate merger reviews will be conducted in about 10 countries, but Hanwha Group does not have a portfolio related to shipbuilding, so I understand that related issues will be relatively fewer compared to previous cases."

Additionally, Chairman Kang explained the decision to maintain financial support for five years even after the transaction closes, saying, "It is expected that some time will be needed for normalization under Hanwha Group," and added, "If Hanwha Group becomes the final acquirer, we judged that extending financial support for five more years will not only enhance DSME's sustainability but also increase our chances of recovering our bonds."