HHI Reforms Company Structure, Includes Voluntary Retirement of Managers
Hyundai Heavy Industries (HHI), a South Korean shipbuilder and offshore engineering company that posted its first operating profit in the March 2016 quarter following 9 consecutive quarters of losses, disclosed plans Monday to boost its competitiveness by reforming its management structure, including the voluntary retirement of manager-level employees.
“Along with the 25 percent cut of senior managers last month, the voluntary retirement plan we announced today is essential for our management rationalization measures in preparation for rapidly decreasing orders,” a HHI officer said in a press release.
The firm's management had proposed to the union to set up a management-labor joint emergency committee to streamline human resource operations in response to falling shipbuilding orders at its yards. Last week, HHI implemented an organizational reshuffle by reducing the number of departments by 22 percent to 305 from 391.
Meanwhile, HHI has commenced a review of the efficiency of its dry dock operations in the current market environment and intends to gradually close underutilized docks if no improvement is seen in the operating climate.
In January, HHI revealed plans for alternative use for its Onsan yard, which manufactures offshore rigs and other resource development facilities, in March after failing to secure a single order for offshore oil and gas facilities as the petroleum industry cutback on capital spending. The Onsan yard, which occupies an area of 2.15 million square feet, is likely to be used as storage for the shipbuilder's raw materials and equipment.
HHI also indicated that the management rationalization plans also include the sell-off of non-core assets such as recreational facilities, while further efforts will be made to reduce costs through the effective assignment of employees’ working hours and holidays.
“With new orders drastically shrinking, we are now making our utmost efforts to steer our company toward new reforming measures that will address the current crisis. However, HHI’s business portfolio is well diversified with various businesses such as engine and machinery, electro electric systems and construction equipment. As our shipbuilding and offshore plant businesses accounts for less than 50 percent of our entire revenue, HHI is less exposed to risks related to the shipbuilding business," the HHI officer said.
"Moreover, since we have a stronger financial soundness compared to our shipbuilding competitors, we hope that the government and creditor banks will review our management rationalization plans from a more objective perspective,” the officer added.
HHI reported April 26 that it posted an operating income of $282.9 million in the first quarter of 2016, while revenue fell 7.8 percent year on year to $8.93 million.
Major South Korean shipyards, including HHI, Daewoo Shipbuilding & Marine Engineering Co., Ltd. (DSME) and Samsung Heavy Industries Co., Ltd. (SHI), incurred heavy operating losses amouting to $6.1 billion last year, as reported Jan. 19 by Yonhap News Agency amid a slump in demand to build offshore oil and gas facilities as well as more intense competition from rival shipyards in China.
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