VietNamNet Bridge – Pointing out “fatal” mistakes in the administration of the Vietnam Shipbuilding Industry Group (Vinashin) in the past, the new Vinashin Chairman Nguyen Ngoc Su (photo) said that the Vinashin ship, from being nearly sunken, is now pumping out water to gradually float to the surface before being fixed to run again.

Troubled shipbuilding group to be restructured for survival

VietNamNet’s Vietnam Economic Forum (VEF) talked with Mr. Su about measures to save Vinashin.

VEF: If we take June 30, 2010 as the landmark for building a new Vinashin, how has the group changed since then? How will it reform to prove that its reform is sound?

Vinashin Chair Nguyen Ngoc Su: The first thing is that the reform starts from the parent company. The group has told its subsidiaries to change their administration in finance and business and to reorganize their business.

It is very important to create the connection among subsidiaries. Previously, Vinashin’s subsidiaries didn’t cooperate with each other and did not receive assistance in production and business. The parent company also failed to coordinate the operations of subsidiaries.

To build a big ship, smaller pieces to assign to subsidiaries. When these pieces are completed, they will be assembled. This method will help shorten the time to build ships while all subsidiaries will have jobs.

Vinashin has to reform entirely and the reform will start from the parent company.

Since I assumed office, 54 regulations on internal operations were finalized in November. All regulations, especially the regulations on financial management, will be completed in December.

VEF: How about the gap in corporate administration? You said that you will restructure/replace the personnel in the group.

Mr. Su: Vinashin is performing a restructuring of the business administration at big companies, starting from the Nam Trieu, Pha Rung, Bach Dang and Ha Long shipyards.

Ha Long is a prestigious shipyard but it faces difficulties in space while Pha Rung and Nam Trieu shipyards have larger spaces but they don’t have as many shipbuilding orders from foreign partners. We will reorganize to strike the balance among these shipyards.

The contingent of officials at other subsidiaries will be examined. Officials who don’t meet requirements will be rotated to do jobs that are appropriate to their qualification. The rotation of officials will be implemented regularly.

VEF: Do subsidiaries support this method?

Mr. Su: This measure is warmly supported by Vinashin subsidiaries. Previously, subsidiaries didn’t really compete with each other to win shipbuilding orders from foreign partners but they only took care of their own interests. The parent company will play the role of the coordinator.

It is very important to have sufficient money for investment and to increase labor productivity to timely complete contracts and hand over ships to partners.

VEF: Of over 200 subsidiaries, Vinashin will maintain only 43 companies. How will the group deal with the remaining firms?

Mr. Su: We divide 216 subsidiaries into five groups: the group that will be handed over to the Oil and Gas Group (PetroVietnam) and the Vietnam Shipping Lines Corporation (Vinalines); the group that will be dissolved; the group that will be merged into other subsidiaries; the group that will be sold or will operate in the form of one member liability companies.

VEF: How will Vinashin sell its subsidiaries? How many directors of subsidiaries have you replaced?

Mr. Su: The selling of Vinashin subsidiaries will be carried out very flexibly.

So far, we have just replaced the director of the Nam Trieu Shipyard. We re about to review the qualification of some condidates to make suitable replacement.

VEF: When Vinashin’s announced its reform program, how did creditors response?

Mr. Su: Creditors understand Vinashin’s difficulties. Vinashin can’t pay its debts immediately. Not all foreign debts are due. Vinashin’s debts will be paid gradually.

For example, the $600 million debt to a group of banks, led by Credit Suisse, is paid every six months, with several dozens of millions USD each. We have asked them to extend the payment time. Frankly, if creditors don’t extend debt payment, Vinashin is unable to pay the debts immediately.

We plan to pay the first debt in late 2011. It is sensible? to fix the debt that Vinashin will pay firstly. We will negotiate with creditors.

VEF: National Assembly deputies and the public want to know how Vinashin will pay the debts?

Mr. Su: If Vinashin pays the debts by income from its business, it will be unable to pay the debts quickly. Shipbuilding is not very profitable. It is similar to a processing job like the garment industry. We have to import equipment and input materials. Workers only do in service[LTPN1] .

To pay debts, Vinashin has to raise labor productivity to improve the shipbuilding pace. If it hands over ships to partners timely, it will have profit and will get many more  contracts. That’s the source for paying debts.

Vinashin will also have to develop the supporting industry to reduce its import of input materials and equipment and maximize profit. Our goal before 2015 is self supplying 50 percent of materials for shipbuilding. At present, the localization value is only 5-10 percent.

According to experts, the most valuable parts in a ship are steel and the engine (50 percent of the value). So far, we  had to import plated steel. Vinashin is urgently building the Cai Lan Steel Rolling Factory, which will provide plated steel for shipbuilding.

We will also upgrade the Bach Dang Ship Engine Plant so the plant will be able to manufacture diesel engines of 4500-6200 horsepower, pumping machines and valves for shipyards and for the market.

Vinashin will cooperate with local firms to manufacture interior parts for ships and other input materials for shipbuilding.

However, the income from business will not be enough to pay part of the debt. The main sources for paying debts will come from selling projects, plants and companies that don’t operate in Vinashin’s three major business scopes.

Another source of income is from selling a large volume of equipment and input materials in stock.

One more source comes from equitization. Vinashin expects to earn around VND21 trillion dong from selling and equitizing 216 subsidiaries.

VEF: As the highest leader of Vinashin, what are you most worried about? What lesson have you learned since you assumed Vinashin Chairmanship?

Mr. Su: I was very worried when I assumed this position. The biggest concern is the group’s debts. I also wonder whether I will be supported in reforming Vinashin andWhether Vinashin personnel is capable to deal with problems.

I was very worried and didn’t want to take this position. I couldn’t eat or sleep for many days. After nearly two months working at Vinashin, I’ve found the reasons for Vinashin’s weaknesses and I feel that the group can be saved if everyone tries their best, if the problems in management and weaknesses are solved.

I think that Vinashin’s mistakes came from its managers, not from employees. Most Vinashin workers are very skillful and work very well but managers are weak and irresponsible. The core point is changing the viewpoint and concept in management, from personnel to overall structure.

Pham Huyen