Korea Development Bank chairman, Lee Dong-gull has called on HMM to improve its salary system and disclosed that the state policy lender will inevitably dispose of its controlling stake in the South Korean flagship liner operator.
Speaking at a press conference on 14 September to mark his fourth anniversary at the bank’s helm, Lee alluded to the recent dispute between HMM’s management and labour unions. HMM’s seafaring and office staff threatened to strike after meagre increments were given after salaries were frozen between 2011 and 2019, despite the company achieving record earnings in 2020.
The dispute was settled with a collective wage agreement and HMM’s management and the unions will form a task force to prepare a wage normalisation plan and a performance-based pay system for the next three years.
Lee pointed out that “it’s important to improve the labour management culture (at HMM). The annual wage and salary agreements and salary system should be improved. These are one of the biggest obstacles to restructuring.”
While Lee noted that it is too early to say that HMM has normalized its operations after staving off bankruptcy in 2016, he claimed that KDB will eventually have to sell off its 24.96% stake in the company.
Lee said, “HMM was in the red for 10 years. HMM’s record-breaking business performance is due to the efforts of its employees, but we must not forget that the current business environment is favorable. If the situation normalises and there is a correction in freight rates, HMM’s profitability can fall.”
In 2016, KDB and HMM’s other creditor banks agreed to swap debt for equity after the company put up a self-rescue plan involving lowering rates for long-term chartered vessels. In June, KDB doubled its stake in HMM to 24.96%, after changing convertible bonds into shares.
KDB has had a tradition of rescuing troubled South Korean businesses, such as Pan Ocean and STX Offshore & Shipbuilding, through debt-for-equity swaps, but has always divested its shares once the businesses recover.
Lee added, “At the moment, we haven’t started the sales process but in future, the bank must divest its stake to pave the way for a smooth merger-and-acquisition procedure.
“This said, any divestment should be decided, based on government’s policy considerations, market conditions and agreement with relevant organisations.”
Lee concluded that KDB, being publicly funded, has to divest its holdings to account to tax payers.
Martina Li
Asia Correspondent
