The South Korean government decided to restructure two financially-troubled mid-sized shipbuilders, said a report in Business Korea.
While filing for court receivership for the debt-ridden Sungdong Shipbuilding, the government has decided to save STX Offshore and Shipbuilding Co. on condition of slashing 75 percent of its production workforce.
The two shipbuilders are heavily indebted to Korea's two state-run banks, as they have struggled with snowballing losses amid unfavorable oil prices and the worldwide industry downturn.
According to the report, the government held a ministerial meeting to discuss ways to strengthen the industrial competitiveness and announce its restructuring plans for mid-size shipbuilders.
STX Offshore and Shipbuilding will need to reduce the number of production employees to 180. In this case, the company has to cut down about 75 percent of its current production employees at 700. The figure is about 40 percent of the total number of employees at 1,350.
Court receivership for Sungdong is inevitable, and STX requires more serious self-rescue efforts to keep it afloat, said the government sources.
The Korea Development Bank (KDB) is the main creditor of STX and the Export-Import Bank of Korea (Eximbank) manages Sungdong, holding a 67.04 percent stake in it after providing more than 3 trillion won ($2.8 billion) in financial support.