State-run shipbuilding firm may go bust

Hurt by the world's sluggish shipbuilding market and its inability to compete with shipbuilders in Japan, South Korea and China, China Shipbuilding Corp (中國造船) may become the first state-run company to go bankrupt at the end of this year, a Chinese-language newspaper reported yesterday, citing Lin Shih-chi (林時機), a member of the Control Yuan.

The company is expected to run out of capital before the year's end with estimated losses of NT$4.5 billion for the year against a current net value of roughly NT$3.28 billion, according to a report by the Commission of National Corporations (國營會) quoted by the newspaper. The Commission of National Corporations is under the Ministry of Economic Affairs, which supervises state-run companies.

The report said that China Shipbuilding had originally projected profits of NT$300 million (US$9.12 million) in the second half of 1999 and 2000, but ended up incurring a deficit of NT$6.5 billion during the period. Moreover, the Kaohsiung-based company lost another NT$600 million in the first two months of this year.

Last year, the government demanded that seven debt-ridden state-run companies, including China Shipbuilding, come up with restructuring plans to solve their financial problems.

The plan proposed by the shipbuilding firm's board of directors in September -- and approved by the commission early this year -- includes laying off about half of its 5,200 workers and reducing salaries of the remaining employees by 35 percent. The company's employees enjoy average monthly wages of around NT$70,000, double the average income of workers in the manufacturing sector.

But the restructuring plan has been met with protest from the company's labor union and is viewed by the Control Yuan as being infeasible.

According to the Control Yuan's Lin, the shipbuilding company is planning to lay off all of its employees and subsequently re-hire 53 percent of them. To do so, the government needs to budget a total of NT$24.7 billion for the layoffs. But "given the financial constraints, the government would not be able to set aside NT$24.7 billion for the project," Lin said.

The Commission of National Corporations hopes to eventually privatize China Shipbuilding. But Minister of Economic Affairs Lin Hsin-yi (林信義) told lawmakers in April that the ministry will first improve the company's finances before pushing for the privatization measures.

President Chen Shui-bian (陳水扁) last week also suggested letting the company make more warships for the navy instead of buying them from abroad.

The plan to let go of some 2,400 employees at the shipbuilding company has also upset Kaohsiung Mayor Frank Hsieh (謝長廷), who said it would exacerbate unemployment problems in southern Taiwan, which has been hit hardest by the surging jobless rate.