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Monday, March 01, 2010

Smooth sailing ahead for Hanjin

Aside from shipbuilding, HHIC is actively looking to get involved in large government projects.

Consumers across the globe are quite familiar with Korea’s electronics and automobile brands, as companies like Samsung and Hyundai are household names in many countries.

But its shipbuilding industry is a major player on the international stage as well, even though most people outside the country likely aren’t as familiar with the companies in this sector.

Although rivals such as China are quickly catching up, Korea has maintained its hold on the global shipbuilding industry. The six largest shipbuilders in the world as of December 2008 were all based in Korea, with the ninth spot also occupied by another local shipyard, according to the global shipbuilding research firm Clarkson Research Services.

Cho Nam-ho (59)

  • Chairman, Hanjin Heavy Industries and Construction

  • Bachelor’s in business administration from Korea University

  • The roots of the nation’s prestigious shipbuilding sector can be traced to Hanjin Heavy Industries and Construction, also known as HHIC. Founded in Busan in 1937 as Chosun Heavy Industries, the company ranks as the country’s oldest shipbuilder. Other current powerhouses such as Hyundai Heavy Industries, Samsung Heavy Industries and Daewoo Shipbuilding and Marine Engineering didn’t come along until the 1970s.
    The Japanese provided a considerable portion of the capital used to establish Chosun Heavy Industries. But the company shed its ties with Japan and became an independent, state-run company in 1945 when Japanese colonial rule ended, changing its name to Korea Shipbuilding and Engineering. It was privatized in the mid-1960s and then, roughly 25 years later, was incorporated into the Hanjin Group, a logistics and transportation giant, becoming Hanjin Heavy Industries and Construction.

    As the oldest shipbuilder in Korea, it has recorded many “firsts” in the industry. It built Korea’s first steel cargo carrier and machine tool lathes as well as its first large ship, an 18,000-ton behemoth named Pan Korea.

    But with the rise in domestic competition over the past few decades, HHIC has lost some of its grip on the industry. Today, Hyundai, Samsung and Daewoo surpass it in numerous areas, though the company still leads in the container area of the shipbuilding business. Maritime Market Research Reports - a major shipbuilding industry analysis agency - also has designated HHIC as the world’s best shipbuilder five times since 1992.

    Although shipbuilding is HHIC’s main focus, the company has branched out over the years into other areas. It made inroads in the construction industry in 1968 when it established Hanil Development, quickly growing the business by participating in various transportation projects such as the construction of Incheon International Airport, Yeongjong Bridge, Busan New Port, Suwon Station and the Gyeongbu Expressway, among others. The company later expanded into more areas through affiliates Korea Engineering Consultants Corporation, Hanjin City Gas and Hanil Leisure. As of last year, the conglomerate’s total assets - including those of its affiliates - stood at 7.23 trillion won ($6.24 billion).

    HHIC and its three affiliates became independent of Hanjin Group in 2006, four years after Cho Choong-hoon, who founded the group in 1945, died.

    At Cho’s request, the group was broken into four different entities, which then were put under the management of his four sons.

    Hanjin Group and Korean Air, the country’s largest airlines, went to the eldest brother Cho Yang-ho; Hanjin Heavy Industries and Construction to the second-eldest, Nam-ho; Hanjin Shipping, the country’s largest shipping firm, went to the third son, Soo-ho; and Meritz Securities and other finance businesses went to Cho Choong-hoon’s fourth son, Jung-ho.

    Under the management of Cho Nam-ho, HHIC has been attempting a sort of corporate revival to regain some of its stature in the industry.
    The first major piece of this plan was construction of the Hanjin Subic Shipyard in the Philippines. The 18-month project, which started in 2007, involved developing a 2.31 million-square-meter (571-acre) site.

    The company is also counting on its construction arm to generate more revenue as the Lee Myung-bak administration pushes for various large development projects, including the 22.2 trillion won four-rivers restoration project.

    “Hanjin Heavy Industries and Construction will be among those companies that benefit the most from the four rivers project and some other development projects going on across the country,” said Kim Hyun, an analyst at LIG Investment and Securities.

    Cho will rely heavily on the executive team he’s assembled to help the company’s revival.

    Vice chairman Kim Jung-hoon worked as an executive at Korean Air before moving to HHIC in 2000, while vice chairman Kim Jeong-woong is a 35-year veteran in the construction business at Hanjin Heavy Industries. Another vice chairman, Choi Jae-bum, was a vice mayor of Seoul before HHIC recruited him in 2007.

    Lee Jai-yong, HHIC president in charge of the shipbuilding business, is a finance expert. He served as a top accounting manager and a vice executive managing director in charge of business finance management. Song Hwa-young, HHIC president in charge of the construction business, and Lee Kang-rock, president of Korea Engineering Consultants Corporation, switched positions with each other in February 2008.

    Kim Han-seung, president of Hanil Leisure, was a former producer at the now-defunct broadcaster TBC and a former Korean Air executive. Shim Jeong-sup, president of Hanjin City Gas, served as the head of HHIC’s operations in the Philippines. By Moon Gwang-lip / joongangdaily.joins.com [joe@joongang.co.kr]

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