Prompted by only 9 orders placed during the first quarter of the year at the South Korean shipyards, the country’s shipbuilding giant Hyundai Heavy Industries (HHI) revealed its plans to close docks which operate at the lower efficiency rate if the ordering slump persists.
Furthermore, in the face of shrinking shipbuilding work at its yards, HHI intends to cut its management workforce through the voluntary retirement of manager-level employees.
“Along with the 25 percent cut of senior managers last month, the voluntary retirement plan we announced today is essential for our management rationalization measures in preparation for rapidly decreasing orders,” an HHI officer said.
HHI’s management rationalization plans also include the sell-off of non-core assets such as recreational facilities.
Last week, the company implemented an organizational reshuffle by slimming down the number of departments from 391 to 305 by 22 percent.
“With new orders drastically shrinking, we are now making our utmost efforts to steer our company toward new reforming measures that will address the current crisis,” the HHI officer said.
The latest round of cost-cutting measures follows a 42.2 percent fall in new orders at the company for the first quarter of 2016 year-on-year, as HHI’s shipbuilding business took a big blow with 63.2% lower orderbook reaching USD 234 million in Q1.
Drastic cost cutting measures have enabled HHI to conclude its first profitable quarter after nine quarters of posting losses recording an operating profit of KRW 325.2 billion (USD 283.2 million).