Text Fwd: KAI Faces Downsizing

Korea Times
03-13-2010 00:37
[Exclusive]KAI Faces Downsizing
By Jung Sung-ki
Staff Reporter

Korea Aerospace Industries (KAI), the nation’s only aircraft maker, is facing a major restructuring and a significant reduction of its executives in coming weeks, amid lingering speculation that the company may be privatized.

Currently, the Korea Finance Corp. (KoFC), which was spun off from the state-owned Korea Development Bank last October, holds a 30.5 percent stake in KAI, which also has three other major shareholders — Samsung Techwin, Doosan DST and Hyundai Motor, each with a 20.5 percent stake.

KDB wanted to sell KAI last year under a government policy to privatize public firms but withdrew the decision temporarily in the face of opposition from KAI’s labor union and concerns that such a move could harm efforts to sell the T-50 supersonic trainer jet to Singapore.

Singapore is set to announce a final bidder for its trainer acquisition program this or next month. The T-50 is competing with the M-346 jet built by Italy’s Alenia Aermacchi.

In a news conference Jan. 28, KoFC Chairman Ryu Jae-han said his organization was looking to sell KAI and other assets in the first half of the year in consideration of the market situation.

``KoFC notified KAI of its restructuring plan last month,’’ an industry source told The Korea Times. ``In particular, the organization asked KAI to halve the company’s executive officers in a bid to streamline the aircraft maker.’’

Other industry sources said the major restructuring could be a preliminary step for privatization.

``It seems that KoFC wants to slim down KAI and increase the company’s efficiency and profitability. If so, the organization will be able to manage KAI in a more flexible manner,’’ the source said.

Observers say the result of the Singapore competition is expected to influence the fate of KAI, which develops and produces a wide range of civil and military aircraft, including helicopters, basic trainer jets and unmanned aerial vehicles.

Last year, KAI apparently lost a bid to Aermacchi to sell up to 48 trainers to the United Arab Emirates (UAE) in a $1.3 billion deal. But reports said in January that the UAE was considering reopening talks with KAI after failing to finalize an agreement with the Italian company.
But reports said in January that the UAE was considering reopening talks with KAI after failing to finalize an agreement with the Italian company.