Hyundai Heavy Industries (HHI) is facing a range of daunting tasks as it tries to emerge from its years-long business slump, according to industry officials, Wednesday. The shipbuilder is grappling with government probes into its safety records following the recent death of a subcontracted worker at its plant in Ulsan. It is also expected to pay more for steel plates, which account for the largest portion of its production costs, in line with soaring prices of iron ore and other raw materials, while its unionized workers threaten to walk out unless their demands are met.
The Ministry of Employment and Labor conducted a search and seizure at HHI headquarters in Ulsan and the offices of its subcontractors, Tuesday, related to the April 2 death of a subcontractor at HHI's Ulsan Plant Panel 2 Factory. The worker lost consciousness in an explosion while cutting a metal sheet and was taken to a hospital, but eventually died.
Hyundai Heavy Industries Chairman Kwon Oh-gap
HHI is subject to the Severe Accidents Punishment Act as it has over 50 full-time workers. The labor ministry plans to check whether all safety protocols were met. If safety management is found to have been insufficient, the employer or business manager could be imprisoned for up to one year or fined up to 1 billion won.
"To prevent serious accidents, HHI plans to increase the scope of field management and enhance safety precautionary measures," an HHI official said.
The company also faces the price hike of steel plates, which will chip away at its profitability. POSCO plans to finalize price negotiations with shipbuilders within this week, and the price is expected to rise by at least 100,000 won per steel plate.
The shipbuilders insist on a price cut or freeze, which is unlikely to be accepted due to the rise in the prices of raw materials such as iron ore and coking coal used for making iron.
If there is a rise in the price of steel plates, which account for about 20 percent of shipbuilding costs, there is a possibility that it will drag down the performance of Korea Shipbuilding & Marine Engineering, an intermediate holding company of HHI Group's shipbuilding division.
In addition, the union of HHI will go on a seven-hour strike starting Wednesday, and an eight-hour strike from April 28 to May 4, unless management responds to the resumption of negotiations regarding 2021 wages.
"Uncertainty in the external environment of the shipbuilding industry has greatly increased due to a surge in raw material prices and a personnel shortage," an HHI official said. "Now is not the time to go on strike, but for labor and management to work together to strengthen competitiveness."
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