Daewoo Shipbuilding & Marine Engineering Co. (DSME) President Jung Sung-leep. A view of DSME’s shipyard in Okpo, Geojae City, Gyeongsangnam-do. (Photos:DSME)

Daewoo Shipbuilding & Marine Engineering Co. (DSME) and STX Offshore & Shipbuilding are establishing a strategic alliance to collaborate in business and procurement areas.

DSME President Jung Sung-leep and STX President Lee Byung-mo share the same view that the two companies need to join forces to overcome the difficulties the Korean shipbuilding industry is now experiencing. The move is also designed to help STX get out of the financial difficulties. STX is now in an individual voluntary arrangement with its creditors. 

“DSME and STX are considering ways to promote mutual cooperation, and specific options will be worked out soon,” a ranking DSME official said. “If the two companies are engaged in joint business activities and procuring of materials, they will see their bargaining power rise, and it will be beneficial to each other.” 

“If STX receives technology support from DSME armed with the world’s top class technology prowess, it will be a boom for STX to win orders on added value ships and build them,” he added. 

Among ways of promoting mutual cooperation under study are joint business activities, joint procurement and DSME providing technology support. The two companies are now considering joining forces to win orders, splitting the construction orders, and jointly procuring equipment and materials to cut costs. 

DSME President Jung served as CEO of STX Offshore & Shipbuilding just before taking the helm of DSME. Jung said in a farewell message to STX executives and staff members he delivered while leaving STX late last month, he was happy to move to a company that would bring benefits to STX. DSME President Jung said he would seek to establish a system to promote cooperation and have synergetic effects with STX.   

If DSME’s system and know-how are shared and utilized, Jung said it would help STX lower costs and improve productivity. It is also the preferred strategy of Korea Development Bank, the main creditor of STX.

DSME’s proposal to team up with STX is said to be DSME President Jung’s idea. Jung served as president of Daewoo Heavy Industries & Shipbuilding, the predecessor of DSME, between 2001 and 2006. And Jung moved to chairman of Daewoo Information Systems before he was appointed to become STX Offshore & Shipbuilding president. He is now coming back to DSME president.  

Industrial experts said DSME President Jung was well aware of the strong and weak points of DSME and STX, and seeking ways of complementing each other was DSME President Jung’s determination as a way to promote synergetic energy through cooperation between the two companies. 

There is history between DSME President Jung and STX Offshore & Shipbuilding President Lee. 

DSME President Jung and STX Offshore & Shipbuilding President Lee once worked for Daewoo Heavy Industries & Shipbuilding, and they are alumni of Gyeonggi High School and the Seoul National University Shipbuilding Department. 

Some experts cited a scenario where merger could take place between DSME and STX. But in reality, the issue of consolidation would be up to Korea Development Bank, the main creditor of the companies. 

However, at a recent meeting with DSME union leaders, DSME President Jung said his company has made it clear that there is no plan to hand over STX Offshore & Shipbuilding.