[News Inside Companies] Why Does HD Hyundai Have Three Shipbuilding Companies?

Hyundai Heavy Industries Ulsan Shipyard / Photo by Hyundai Heavy Industries Homepage Capture

Hyundai Heavy Industries Group (HD Hyundai), one of Korea's three major shipbuilding companies, was formed by the merger of three large shipbuilders. As a company that shares the same trajectory as the beginning of Korea's shipbuilding industry, its corporate structure history is also complex and multifaceted.

HD Hyundai is a massive conglomerate with business divisions in shipbuilding, machinery, energy, and more. The core shipbuilding business of the group is managed by Korea Shipbuilding & Offshore Engineering, an intermediate holding company established in 2019. Korea Shipbuilding & Offshore Engineering has three subsidiaries: Hyundai Heavy Industries, Hyundai Samho Heavy Industries, and Hyundai Mipo Dockyard.

How the Hyundai Heavy Industries Shipbuilding Family United

Hyundai Heavy Industries, the foundation of HD Hyundai's shipbuilding business, was established in 1973 by the late Chung Ju-yung, former chairman of Hyundai Group. Starting from a small fishing village in Ulsan, the company built a 260,000-ton tanker for Greece and, in just over a decade, rose to become the world's number one shipbuilding company?a legendary Hyundai Heavy Industries story.

As Hyundai Heavy Industries grew, the need to expand beyond simple shipbuilding into related services became more pressing. Accordingly, in 1974, Chairman Chung Ju-yung spun off the ship repair division from Hyundai Heavy Industries into Hyundai Mipo Dockyard. Hyundai Mipo Dockyard was jointly established with Hyundai Heavy Industries holding 80% and Japan's Kawasaki Heavy Industries holding 20%. Since then, Hyundai Mipo Dockyard has grown into Korea's largest specialized ship repair company.

In the 1990s, as competition in the ship repair sector intensified, from 1997 Hyundai Mipo Dockyard began focusing on securing 'niche markets' such as small and medium-sized ships and special vessels. It has now transformed into a shipbuilder specializing in small and medium-sized ship orders for Hyundai Heavy Industries.

Another shipbuilding affiliate of Hyundai Heavy Industries Group, Hyundai Samho Heavy Industries, joined the Hyundai family in 2003. This company began in the 1980s as Hanla Heavy Industries based in Incheon but faced a crisis when its parent company, Hanla Group, went bankrupt during the 1997 Asian financial crisis. At that time, Hyundai Heavy Industries took over management on a consignment basis, and after the consignment ended in 2002, Hyundai Heavy Industries decided to formally acquire the company. In 2003, the company was renamed Hyundai Samho Heavy Industries and incorporated as a Hyundai Heavy Industries affiliate. Its main business division is ship and transport equipment construction.

Transition to a Holding Company System from a Chaebol

Until recently, Hyundai Heavy Industries' shipbuilding affiliates operated under a typical chaebol circular shareholding structure: Hyundai Heavy Industries → Hyundai Samho Heavy Industries → Hyundai Mipo Dockyard, and back to Hyundai Heavy Industries.

However, this structure changed starting in 2017. Hyundai Heavy Industries split its existing business units into four companies: Hyundai Heavy Industries (shipbuilding), Hyundai Robotics, Hyundai Electric & Energy Systems (Hyundai Electric), and Hyundai Construction Equipment. Additionally, the investment division was separated to establish Hyundai Heavy Industries Holdings, known as HD Hyundai, which oversees all companies under Hyundai Heavy Industries. In 2019, Korea Shipbuilding & Offshore Engineering was spun off as an intermediate holding company under HD Hyundai to manage the three major shipbuilders: Hyundai Heavy Industries, Hyundai Mipo Dockyard, and Hyundai Samho Heavy Industries.

Unprecedented Joint Strike by the Three Shipbuilders... Difficult Collective Bargaining

Although united under the Hyundai Heavy Industries umbrella, the three shipbuilders with distinct expertise and identities announced on the 26th that they approved a joint strike action. The vote took place over three days from the 24th to the 26th among all union members of Hyundai Heavy Industries, with 5,224 out of 7,776 members (67.2%) participating, and 4,912 voting in favor.

On July 18th, the labor unions of the three shipbuilding companies under Hyundai Heavy Industries Group (Hyundai Heavy Industries, Hyundai Mipo Dockyard, and Samho Heavy Industries) held a rally in front of the Hyundai headquarters building in Gyedong, Seoul, demanding joint negotiations with management for this year's wages and collective agreements. / Photo by Yonhap News

This is the first time the three core shipbuilders of Hyundai Heavy Industries have engaged in a 'solidarity strike.' Currently, the unions of the three companies are demanding from management ▲a basic wage increase of 142,300 KRW (separate from seniority increments) ▲guaranteed performance bonuses of 250%+@ ▲abolition of the wage peak system ▲annual dental prosthesis support of 1 million KRW for union members. On the other hand, management argues that fully accepting these demands would incur additional operating costs amounting to several hundred billion KRW, making it difficult to agree.

Meanwhile, the three Hyundai Heavy Industries shipbuilders and management have been negotiating wages and collective agreements since March. Although 22 rounds of negotiations have been held so far, no significant agreement has been reached.