Workers at Daewoo Shipbuilding & Marine Engineering (DSME) have begun negotiations with their employer, after some of them went on strike during 7-8 July 2015, after the shipbuilder delayed payment of KRW20 billion (USD17.6 million) in ordinary wages.
In March, DSME’s management agreed to pay ordinary wages by 7 July, after both sides went to court.
However, some of the workers went on strike when payment was not made by the due date. Each worker is owed around KRW3 million in ordinary wages.
DSME, South Korea’s third-biggest shipbuilder, informed the union that cashflow problems made it difficult for the payment to be made, but the union accused the management of delaying the payment to give itself the upper hand in negotiations over wages.
DSME told IHS Maritime, “We’re having some management difficulties, so we asked for the workers’ union’s understanding. The strike stopped yesterday and we continue to talk with the union to solve the problem.”
True Friend Korea Investment & Securities analysts Lee Kyung-ja and Ahn Hyung-jun expect a tough year for DSME, which has booked bad debt expenses of KRW125 billion relating to shipping company TMT defaulting on ships ordered in earlier years.
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Lee and Ahn said, “Operating cash flows, a leading indicator in the order-driven sector, deteriorated to a KRW787.9 billion deficit and net debt increased by KRW500 billion, eroding the balance sheet compared to 2014.”
DSME also paid out retroactive overtime wages of KRW45 billion in the first quarter of 2015.
As at the end of 2014, DSME had total debts of KRW15.526 trillion, up from KRW13.71 trillion at the end of 2013.
Lee and Ahn said, “With delays in drillship deliveries and input costs rising for offshore projects, we expect a slow decline in net debt.”