"Shipping Fiasco Was Unavoidable" Says Hanjin Chief
Hanjin Group Chairman Cho Yang-ho, the largest stakeholder of the group’s cash-strapped Hanjin Shipping, said Tuesday the recent shipping fiasco sparked by court receivership of the shipping line was “unavoidable.”
“It was an unavoidable situation derived from the aggressive supply of government-backed foreign shipping lines and their low price strategies,” Cho said in a parliamentary audit for the state-run Korea Development Bank. KDB is the main creditor of Hanjin Shipping.
Hanjin Group Chairman Cho Yang-ho (right) meets KDB chairman Lee Dong-geol as they attend a parliamentary audit at the National Assembly on Tuesday. (Yonhap)
“I felt our power was very limited as a private company. I apologize to the people for letting Hanjin Shipping face court receivership and causing a logistical chaos,” he said.
Cho said he made a confident investment of 2 trillion won to acquire Hanjin Shipping in 2014 because the shipping line was also a logistics business as Korean Air, the group’s other subsidiary. Hanjin Shipping had seemed to have competitiveness in sales and the abity to beat the recession at that time, he said.
Earlier in the morning, KDB Chairman Lee Dong-geol said Hanjin Group was responsible for the recent logistical chaos in the shipping industry.
“We have explained a numerous times (to Hanjin) that it could face court receivership if it fails to secure much needed capital by itself. But Hanjin waited for the creditors’ capital support,” Lee said in a parliamentary audit.
“We called on the CEO of Hanjin Shipping and the CFO of Hyundai Merchant Marine to come up with contingency plans in case of logistical chaos. But Hanjin refused to do so citing worries over breach of trust.”
Lee went on to say that the creditor bank decided to let Hanjin face court receivership because Hanjin chairman Cho lacked a will to sacrifice himself as the largest stakeholder to secure more cash, while Hyundai Group decided to sell Hyundai Securities to raise money.
Meanwhile, if Hanjin Shipping fails to avoid liquidation, about 63 percent of its logistics capacity will be taken by overseas shipping companies, according to Rep. Park Yong-jin of the main opposition The Minjoo Party of Korea during the audit.
Citing a report submitted by the state think tank Korea Maritime Institute, Park said out of the 1.88 million TEU managed by Hanjin Shipping, 1.18 million Twenty-foot Equivelent Unit will be absorbed by foreign shippers, if the Korean shipper is liquidated. Only 320,000 TEU or 17 percent will go to the local No. 2 shipping firm Hyundai Merchant Marine, the report said.
On the liquidation scenario, the total loss from the company’s lost revenues, additional shipping burdens and lost added value at ports will amount to 8.25 trillion won, the report said. About 11,000 jobs will be shed following the liquidation of Hanjin, it said.
On the other hand, if HMM partly buys healthy assets of Hanjin Shipping, it will be able to take over about 60 percent of Hanjin’s logistics capacity and the total loss will be reduced to 2.7 trillion won, the report said. A job loss will be cut to 3,200, it said.
“The government and the Korea Development Bank have turned a blind eye to Hanjin Shipping’s court receivership even when they could expect massive economic damage and a loss of national wealth,” Park said in a statement.
Unlike market speculation, the world’s biggest container operator Maersk is not interested in buying Hanjin or HMM, the Wall Street Journal reported Tuesday quoting unnamed sources.