Hyundai Heavy Shareholders Approve Restructuring Plan
On Monday, the shareholders of Hyundai Heavy Industries voted to spin off the firm's non-core businesses, despite vehement objections from the company's union employees.
The union staged three days of strikes to protest the restructuring plan, its first full-day work stoppages in 23 years. The plan will affect about 5,000 HHI employees, and union leaders have warned that it will leave its members vulnerable to wage cuts and layoffs. The labor-management tension also stems from a dispute over compensation: in recent negotiations, HHI has called for an across-the-board 20 percent pay cut, while the union favors a seven percent raise.
In addition to the labor stoppages, more than 1,000 union workers attempted to disrupt the shareholders' meeting on Monday, and they succeeded in halting it four times. Nonetheless, shareholders ultimately approved the restructuring by an overwhelming 98 percent margin.
The shareholder motion splits the world's largest shipbuilder into six separate companies – a shipbuilding entity, plus five independent firms derived from the conglomerate's electronics, robotics, services, alternative energy and construction equipment divisions. HHI's management says that the split will yield significant regulatory and governance advantages for its varied operations, and it is also expected to reduce the shipyard's debt-to-equity ratio below the 100 percent mark. All of the subsidiaries should be publicly listed and running independently by May, and trading in HHI will be suspended until the restructuring is complete.
HHI's breakup is driven in part by a stark reversal in fortune for South Korean shipbuilders. All of the nation's "Big Three" yards posted losses in 2015, with revenues and ordering pushed down by the simultaneous decline of the shipping and offshore sectors. In response to dwindling orderbooks, the shipbuilders have closed yards, sold off non-core assets, renegotiated terms of credit and reduced their headcounts. They have already laid off thousands of workers, and they are expected to let go an additional 4,000 by the end of this year.