It’s not everyday that you see the Koreans compared to the Terrible Turk:
Every student of history should remember the Battle of Lepanto. For those who might have forgotten, it took place in 1571 in the waters off western Greece and was the last major naval battle to be fought solely between rowing vessels.
The Holy League, a coalition of the Republic of Venice, the Papacy, Spain, the Republic of Genoa, the Duchy of Savoy and the Knights of Malta, routed the Ottoman fleet. As a result, the Holy League gained temporary control of the Mediterranean, protected Rome from invasion, and stopped the Ottomans from advancing into Europe.
More than four centuries later, a coalition of European interests is being formed to block what they consider is an undesirable and extremely dangerous incursion by the South Koreans into European shipbuilding. Brussels, too, has launched an in-depth investigation into the recent acquisition by the South Korean STX shipbuilding group of a 39.2 per cent stake in Aker Yards, the Norwegian shipbuilder and one of the world’s largest.
The French were the first to sound the alarm. After all, the former owner of Aker Yards - the flamboyant Norwegian self-made businessman Kjell Inge Rokke - was considered in France as the saviour of the Alstom shipyards when he bought 75 per cent control of the Saint-Nazaire and Lorient yards two years ago.
The French became nervous when he later sold his controlling stake in Aker Yards, and appalled when the Koreans moved in. So was the Norwegian group’s management, which has since enlisted the support of investment banks, including JPMorgan, to help them devise alternative strategies to contain the Koreans. And now the Italians have not only joined this coalition, but indeed are being urged to lead it by their European partners, just as they did in 1571 against the Turks.
With the “pitcher” and “catcher” switching roles for once, it’s tempting to gloat. I won’t, though, especially since one fears the lesson the Koreans will take home from this most likely WON’T be, “Europeans are protectionist assholes. Let’s not be like them,” and instead will be, “It’s OK for politicians and big businesses to collude to screw foreigner investors.”
(HT to reader)
11 Comments
Hahaha…
That’s funny on so many different levels. First level is the irony… Koreans always bitch and moan when a foreign company buys into one of their companies, it’s interesting to see the reverse take place. Europeans bitch and moan when the Koreas do likewise.
The naval influence is ironic too. I don’t know if the author know’s this, but Koreans also use naval battle analogies from the late 15th century to inspire them to defend against undue foreign invasion.
I can certainly understand the concern coming from the European side on this.
The Korean shipbuilding market which is largely vessels for LNG, oil and cargo is currently booming (full order book for the next 5 years)however they are coming up against more and more price competition from the Chinese and causing a reduction in profit.
STX have purchased a 3rd of Aker, which on the face of it gives them a larger annual capacity to manufacture vessels if they wish to use the Aker shipyards. However, and i could be wrong, i get the impression this is more about gaining information and technology on passenger and cruise ships which the Chinese dont make and therefore allowing them to bid without the pesky Chinese coming in and forcing down the prices.
I forgot to add that although my assumption above would protect the profit of STX against the Chinese the prices that STX would be quoting would be less than those of the European shipyards. Hence the current concerns.
The stated strategy of every Korean shipbuilder now is “build high value-added ships”, referring to LNG carriers and very large containerships and crude carriers, plus ocean platforms.
China surpassed Korea last year as the world’s largest shipbuilder by tonnage. There’s no stopping it, China’s on the way, starting with smaller low-tech ships of course. Korea nonetheless has real competitive advantage in shihpbuilding, so diversification makes sense. STX is even building a new yard at Dalian, China, to handle its orders for “regular” ships, letting its Jinhae and Busan yards take high-value ships.
I also suspect Aker is about cruise ship knowledge acquisition, but it could be good for both companies. Aker has declining productivity, but STX has been the industry leader in boosting dock turnover. What I don’t get is why STX is trumpeting about Dalian as a major part of its global strategy to be “World Best”, but it says nothing about Aker. I’m writing STX’s (English) annual report now - the word Aker never appears once. At $800m, it was a major investment.
I believe it was the 16th century, WangKon.
STX executed their strategy quickly, but poorly. They did not engage the unions or the managment very well, explain thier intentions nor do anything to set the Europeans minds at ease. They just bought their stake, thought everything was done and now face an investigtion from the EU.
Thats not to say that the Europeans aren’tright to be concerned, I doubt STX is looking for more capacity at the moment. With economic recessions looming in the US, we may see the end to the shipping market cycle. A full five year order book means little if the shipping companies run short of money and can’t pay for them. The best way to hedge it is to invest in the cruise newbuild market or offshore market.
In the long term, STX and the other Korean builders know the Chinese labor edge will win out, and they themselves will go the way of the Japanese if they can’t expand into the cruise market.
One thing not mentioned is that this is proof that Korea isn’t the only xenophobic country in respects to foreign investment. Although I do doubt that Europe will put any STX executives on trial for any legal technicalities.
I see nothing sinister in STX’s investment in Aker and it wasn’t exactly a hostile investment anyways. The European shipbuilding industry needs new blood and STX will help Aker in the long run.
Linkd, you are correct, it is the late 16th, not 15th century. That slip was embarrassing for myself, someone who’s read both Turnbull and Hawley’s books on the Imjin War.
Wow. Maybe you guys could start an international shipping blog.
Was STX Daewoo Chosun, or Hyundai’s shipbuilding affiliate? I checked the website, but couldn’t find it. Who are the major shareholders? Did the original chaebol retain some ownership and bring in outside capital? Thanks
Ah, see, you’re thinking that the words “Annual Report” mean the same thing to a Korean company. Those are national security secrets, buddy. You don’t think they put highly sensitive information like onto the intenet, in English, for just anyone to read, do you? Do you know what would happen if people knew who owned Korea’s corporations?
The answers are: neither. Forcetec, and Han Duck soo (the company’s chairman), and N/S.
I mean N/A. And Mao’s right, what looked interesting on Thursday morning looks kinda lame on Friday night. Miller Time.
Correction 2: the chairman’s a kang, not a han.
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