Hanjin Heavy chief presents solution to settle strike over layoffs

“The company won`t give up its Yeongdo shipyard or leave Busan,” Hanjin Heavy Industries Chairman Cho Nam-ho told a news conference at Busan City Hall at 10:30 a.m. Wednesday. He also apologized to the people and partner companies for causing trouble.

This is the first time Cho expressed his stance in an official setting since a strike at Hanjin Heavy Industries began over the company’s decision to lay off employees en masse.

○ Display of good faith

This is also Cho’s first public appearance since he went on a business trip abroad 53 days ago.

“Painful restructuring was an inevitable choice. For those who choose voluntary retirement (360 as of Wednesday) among the 400 employees subject to retirement, the company will provide education costs for two children until they graduate from college,” said Chairman Cho.

According to the company spokesman, the beneficiaries will be school-age children of retired workers, preschoolers and those yet to be born to them.

Cho also pledged to bring retirees back to work if business returns to normal.

On the normalization of business, the chairman said, “The size of the Yeongdo shipyard is just 264,000 square meters so it cannot keep up with the global trend of building large ships,” adding, “We will receive orders to build special ships that fit the size of the Yeongdo shipyard.”

Turning to the interests of Busan area residents and partner companies, Cho said, “We will raise developmental funds for residents and craft support measures that guarantee practical compensation commensurate with business performance every year."

○ Mixed reactions to Cho’s statements

Opinions on Cho’s statements were mixed, however. Shin Jung-taek, president of the Busan Chamber of Commerce and Industry, said, “We welcome Chairman Cho stepping forward to resolve the matter,” adding, “Management and labor should end their war of attrition and look for ways to keep both the company and its partner companies afloat.”

Je Jong-mo, speaker of the Busan city council, said, “Busan citizens have been deeply worried over the situation,” adding, “I hope the local economy will be revitalized and social conflict will end.”

By contrast, those have led the “Hope Bus” campaign were critical of Cho’s comments. In a statement, they told reporters the same day in front of the main gate of Deoksu Palace in central Seoul, “Chairman Cho was hiding himself abroad while ignoring a request to appear at a parliamentary hearing,” and urged the government to “immediately punish Cho, who is responsible for the situation.”

They also urged Cho to "immediately cancel" the layoff of Hanjin employees, adding, “If he fails to do so, he will face bigger resistance.”

Kim Jin-suk, who is staging a strike on a crane against the layoff, said in a news conference over the phone, “Chairman Cho should resolve the issue as the person who caused the situation,” adding, “If he cancels the layoff, I will come down from the crane.”

Kim is a senior member of the Busan branch of the hard-line Korean Confederation of Trade Unions.

○ Restoring Hanjin back to normal

Hanjin Heavy Industries posted a deficit of 51.7 billion won (47.8 million U.S. dollars) last year due to lack of new orders over the past three years. In particular, the Yeongdo shipyard has innate limitations due to its small size.

The shipyards of Korea’s three largest shipbuilding companies -- Hyundai Heavy Industries, Daewoo Shipbuilding & Marine Engineering and Samsung Heavy Industries -- each cover more than 5 square kilometers.

So industry insiders say Hanjin should put its business on track by winning orders for small- and mid-size ships first and building vessels with high added value later, adding this method can return business to normal.

Cho’s comment to turn the Yeongdo shipyard into a special-purpose facility is in line with this suggestion. Hanjin received an order from the Defense Acquisition Program Administration to build two military ships after the strike by the company’s union ended last month.

The Korea Shipbuilders’ Association said, “Hanjin evidently has technical prowess as it has developed a dam engineering method in which a ship is assembled inside and outside of a dock,” adding, “If the company follows Cho’s plan and wins orders to build special ships by making the most of its technological power, it can secure competitiveness.”

A major stumbling block, however, is the lack of orders for small- and mid-size ships. According to shipbuilding industry, Hanjin needs to increase the volume of orders by efficiently targeting a niche market, which is the key to resolving the current problem.

silent@donga.com alwaysj@donga.com