Daewoo Shipbuilding: from a ₩1.5 trillion fraud to profit, then Hanwha's takeover

In June 2016 South Korea's Board of Audit and Inspection found ₩1.5 trillion (US$1.27 billion) of accounting fraud at Daewoo Shipbuilding & Marine Engineering: management had overstated operating profit by ₩44 billion in 2013 and ₩1.09 trillion in 2014, and the yard posted a ₩5.5 trillion operating loss for 2015. The auditors also faulted main creditor Korea Development Bank for failing to supervise management, even as the company paid ₩87.7 billion in incentives to employees.

The state-led answer was a creditor workout rather than liquidation: a capped rescue credit line of up to ₩2.9 trillion, asset disposals, a much smaller workforce and an exit from the loss-making offshore plant business, while DSME refocused on commercial ships and naval work. President Jung Sung-rip framed the goal as a 'small but solid' company with sustainable revenue of ₩7-8 trillion.

The self-rescue plan showed up in filings before any foreign outlet noticed. By the third quarter of 2018 the company had recorded three consecutive quarters in the black, with January-September revenue of ₩6.78 trillion and ₩705 billion of operating profit — about ₩400 billion from production and roughly ₩300 billion one-off from a drillship sale and provision reversals. Drawdowns on the rescue credit line fell from ₩790 billion at end-2017 to ₩350 billion, and operating cash flow turned positive.

The normalized yard attracted a buyer. At the May 23, 2023 shareholders' meeting Hanwha Group completed a ₩2 trillion payment for newly issued shares, renamed the company Hanwha Ocean and became its largest shareholder with 49.3 percent, while KDB stayed on as the second-largest holder with 28.2 percent.

Three straight quarterly operating profits in 2018; rescue-credit drawdowns cut from ₩790bn to ₩350bn; Hanwha paid ₩2tn for control in 2023.

The audit quantified the rot first: a ₩1.5 trillion fraud figure made denial impossible and forced creditors, not politicians, to set the terms.

The workout shrank DSME to a size it could run profitably instead of defending every yard and every offshore contract.

One-off gains from selling drillships and reversing provisions bridged the company while commercial ship orders recovered.

Quarterly drawdowns on the ₩2.9 trillion rescue line gave creditors a running metric of whether management was actually executing.

A creditor workout works when it pairs money with a smaller business: cut the losing product line, sell assets fast, and report progress in numbers creditors can check each quarter, not in promises.

DSME emerged from creditor control without liquidation: order books rebuilt around LNG carriers and naval ships, and in 2023 Hanwha Group took control through a ₩2 trillion share payment, rebranding the 45-year-old yard as Hanwha Ocean. KDB, which had overseen the workout, kept a 28.2 percent stake as the second-largest shareholder, and the new owner positioned the company around naval exports and LNG carriers.