HHI: To Infinity & Beyond

Thirty years ago when Greek shipowner George Livanos met with Hyundai Heavy Industries (HHI) founder Chung Ju Yung met on a sandy beach on the tip of the Korean peninsula where the new HHI shipyard would stand, little did they know that 30 years later, HHI would have delivered 1,000 ships of 75 mdwt to 188 shipowners in 42 countries. HHI is celebrating its 30th anniversary in a manner most any other commercial shipbuilder would enjoy, with the delivery of its 1,000th vessel, or the equivalent of 77.5 million dwt. Rival shipyards and political organizations in Europe, the U.S. and Japan often question the manner in which HHI and its shipbuilding colleagues in South Korea garner such large market share, with the dreaded word “subsidies” used with great earnest. Politics, innuendo and denial aside, the inescapable fact though, is that since its inception during the ground-breaking ceremony in 1972 in Ulsan, the company has evolved into one of the most prolific shipbuilding organizations the world has seen, setting a new world record in shipbuilding history for producing the largest-ever volume of ships in the shortest period of time. By its own account, HHI currently accounts for 15 percent of the world shipbuilding market, and in 2001 alone delivered 56 vessels (or, slightly more than one ship per week) of nearly five million dwt. HHI has delivered ships to more than 188 companies in 42 countries, including 82 vessels to Greece; 75 to the U.S.; 69 to Germany; 64 to Norwa; 49 to Denmark; and so on. By ship type, HHI has delivered 276 bulk carriers (25 million dwt); 228 tankers (35.4 million dwt); 180 full containerships (8.8 million dwt); 52 pure car carrier/RoRo ships (802,000 dwt); 39 gas carriers (one million dwt); etc. 30 Years in the Making In 1972, construction began on HHI’s shipyard in Mipo Bay, Ulsan, which was then a small fishing village with bleak sandy beaches. Carrying a blueprint of the beach site where the Hyundai Shipyard was to be built, Chung Ju Yung, founder of HHI, met with George S. Livanos, a Greek shipowner, and won the order for two 260,000-dwt VLCCs. Work proceeded simultaneously on the shipyard and the two VLCCs. And 27 months later in 1974, a simultaneous ceremony was held to commemorate the completion of the shipyard and naming of the two VLCCs. Up to that point, the largest ship Korea had ever built was a 17,000-dwt cargo ship, and Korea's market share in world shipbuilding was less than one percent. Within 10 years of the first VLCC delivery, HHI delivered 231 vessels, exceeding 10 million dwt of ship production in 1984. Since then, the shipyard delivered an aggregate total of 389 vessels (20 million dwt) by 1988, 566 vessels (40 million dwt) by 1994, and 671 vessels (50 million dwt) by 1997, setting new world records for production. Upon completing its shipyard in 1974, HHI was the first Korean company to reach $100 million in exports and has since exported 80 percent of its products each year. Last year, the Shipbuilding Division alone recorded an export performance of $3 billion. The Future is Now Though the last three decades has resulted in the world’s largest shipbuilder, by volume, residing in South Korea, the trip has had its fair share of bumps. The latest has been an EU argument that South Korea has granted substantial subsidies to its shipyards, contravening the WTO's 1994 Subsidies Agreement. South Korean shipbuilders deny EU charges that they benefit from illegal subsidies. In 1997, the Far East financial crisis deeply wounded many of Korea’s largest corporate entities, resulting in a much more streamlined and cost-effective business model to bring products to market. HHI has set its eyes on $7.85 billion in new orders for 2002, to secure a stable work volume. The Shipbuilding Division has established its 2002 new order target at 56 vessels and $3.1 billion in order to maintain a stable workload and has targeted to zero in on expansion of gas carrier, FPSO, and special ship production. To briefly summarize HHI's 2001 performance, orders totaled $6.4B and exports totaled $4.1B. HHI's 2002 new order target is $7.8 billion. In 2002, facility investment will decline 6.5 percent, keeping in mind a stabilized financial structure and steady cash flow, while investment in research and development will rise 13.5 percent, to ensure a long-term technological advantage and the top position in core technology.