Daewoo Shipbuilding & Marine Engineering Co. (DSME) chief executive pledged not to receive a cent to plead employees to join in the pain-sharing commitment to reduce labor cost by 25 percent in return for a new bailout that would require additional multimillion-dollar tax funds and losses from lenders and investors.
“Creditors ask more of us beyond the thorough execution of earlier self-rescue plans. We must vow not to strike and take collective action and willingly cut salaries,” Jung Sung-leep, told employees through internal broadcasting.
Jung has been returning 30 percent of his monthly pay back to the company since last year. Other executives have turned back 20 percent and office workers 10 percent to 15 percent of their monthly paycheck from the second half of last year.
DSME’s main creditor and largest shareholder Korea Development Bank (KDB) and the Financial Services Commission last Thursday demanded the shipbuilder to trim down its personnel expenses by 25 percent this year. DSME would have to bring down payroll to 640 billion won this year from 850 billion won last year.
Without employees’ show of will, the company won’t be able to win debt relief from private lenders. Then, the company could be headed for a court-led prepackaged program.
“Once we enter court-led reorganization scheme, labor and facility scale-down would be beyond our control and forced on us. Our corporate viability would be at stake if our clients call off contracts,” he said.
Creditors expect DSME would lose 96 existing orders if it goes under court receivership or 40 under prearranged court program. If creditors extend lifeline through debt rescheduling and new funding, the shipbuilder would be able to deliver 48 vessels on schedule and add 10 trillion won ($9 billion) to its income.
DSME has run out of 4.2 trillion won bailout it had received in October 2015, and the government and state lenders are trying to arrange another rescue scheme that would include 2.9 trillion won new loans and rescheduling of existing 3.9 trillion won through a debt-to-equity swap, rollover and lowered rates from all creditors including bondholders.
The Original Posted By Moon Ji-woong/Maeil Business News Korea