Cash crisis at DMHI

The Romanian president said that production at Daewoo Mangalia (DMHI) may have to stop if it does not receive a cash injection. DMHI is a joint venture shipyard between South Korea’s Daewoo Shipbuilding & Marine Engineering and state-owned shipyard Santierul Naval 2 Mai. DSME has a controlling 50.99% stake in the company.

According to local reports, Romanian President Traian Basescu visited DMHI earlier this week and held meetings with the management regarding what he later termed “a liquidity shortage”. A solution has to be found with the Korean partner to overcome the cash-flow problem if production is not to stop.

In Seoul, DSME’s public relations officer Kim Tae Hyun said, “DMHI had been faced with a number of difficulties over the last 18 months. Last year, up to 30% of the shipyard’s engineers and workers left to seek their fortunes in Western Europe,” said Kim. However, as the global economic downturn began to bite, engineers and workers had second thoughts and this year, many of them have returned.

In the interim, DSME seconded about 200 of its own workforce in an effort to keep up production levels although production did slow temporarily, coinciding with the collapse of new orders that began in earnest in the autumn of 2008. Liquidity began to fall rapidly at that point and DSME injected $100m in cash into DMHI.

“After the return of the Romanian workforce, productivity quickly returned to normal,” said Kim. “But due to the lack of new orders, liquidity is once again a problem. When the management of DHMI met Romania’s head of state earlier this week, they put the situation to him on the basis that the government is a very significant shareholder in the shipyard,” he said.

All parties are expressing the hope that both DSME and the Romanian government can raise the necessary liquidity that will enable the shipyard to continue its production as usual. According to Clarkson Research Services, DMHI currently has an order backlog of 25 vessels stretching to early 2012.