Last weekend (Jun. 12 ~ 13, 2011), something big happened in one part of the 2nd largest city in Korea, Busan. Exactly, a small island called Youngdo. You may not notice that it is an island when you get there because it is connected to mainland by bridges long time ago. Only the name of that place still carries the meaning of island in it. And the place of interest is a shipyard of Hanjin Heavy Industries Inc., a ship building company in Korea.
Ship building industry has been one of the most booming and competitive business sectors in Korea for a while despite the fact that global competition involving countries like China and Japan has been fierce recently. In particular, Chinese companies armed with cheap labor and tremendous amount of subsidies from government have eaten up a large portion of low-priced bulk ship orders. But still, in terms of global order backlog, Korean ship building industry is in good shape and about 6 or 7 companies in global top 10 are still Korean ship makers such as Samsung Heavy Industries, Hyungdai Heavy Industries and so on.
Although it is not in top 10 list, Hanjin must have made a lot of money at least last year. How do I know this? Because it paid stock dividend of 0.01 share per 1 common share to shareholders last year (Dec. 16). At that time, Hanjin shares (face value: 5,000 KRW (4.59 U$)) were traded at a price 36,000 KRW (33 U$). So the total stock dividends were quite heavy, right? (More than 17B KRW (16.6M U$)) Prior to that, it already handed out more than 100B KRW (97.3M U$) to executives and staff members as earned surplus until 3/4 quarter. Each Board Member is known to be paid, on average, about 199M KRW (183,000 U$) until September. Good. Companies making profits should share them with their shareholders and employees, of course.
And the company laid out a plan to layoff 1/3 (about 400 out of 1,200) of its production workers on Dec. 15, just one day before it would hand out dividends to shareholders. Reasons? Depleting workloads, declining competitive edge, drying new orders, deteriorating performance, and so on. They also mentioned they had not get any new orders over two years and existing workloads would go out in the first half of 2011.
Obvious question: What’s going on there? They are firing their workers on the grounds of risky business environment and handing out large sum of dividends to shareholders the next day?
Anyway, one universal thing we can notice about ship building industry all over the world is that it is one of the most heavily unionized business sectors of all. You may remember that the Solidarity trade union movement started from Gdansk shipyard eventually overturned the Communist regime in Poland 1989. Of course Hanjin has a workers’ union and they got really upset about the employer’s company down-sizing and layoff plan because it didn’t make sense to them.
Finally, union workers went on strike on Dec. 20, 2010.