The head of the ailing shipbuilder Daewoo Shipbuilding and Marine Engineering on Wednesday urged employees to take part in a pay cut, warning that it is their last chance to save the company.

Jung Sung-leep, the president of DSME, asked workers to undergo a pay cut of 10 percent saying it is for the sake of the company’s survival. 

“Before I ask you to join the pay cut move, I will return 100 percent of my salary,” Jung told employees via an in-house broadcast Wednesday.

His announcement is seen as an attempt to push through a fresh rescue plan announced last week.

The main creditors of DSME, led by Korea Development Bank, unveiled a new financial aid plan worth 2.9 trillion won ($2.6 billion) last week.

According to the plan, KDB and The Export-Import Bank of Korea will inject fresh liquidity worth 2.9 trillion won into the company, but only if its debtholders agree to swap 2.9 trillion won of debt into equity and give a three-year grace period on repayment of the remaining debt.

The plan also demands that the company further cut 25 percent of labor costs. DSME plans to ask all of its employees including its production staff to undergo a pay reduction of 10 percent as well as one month of unpaid leave.

Last year, the company reduced 20 percent of labor costs by cutting about 3,000 of its workforce and its office workers accepting a pay cut of 10 percent.

It is a voluntary option to join the pay cut, but the company and its employees are under increasing pressure to show willingness to shoulder the burden to save the cash-strapped company before bondholders gather for critical meetings on April 17 and 18, said an official at one of the company’s creditors.

Jung told employees via the in-house broadcast Wednesday, “The last financial aid was due to the structural issues of the company but this is a short-term liquidity problem.”

“If we overcome this crisis and continue to carry on the restructuring plans, the company will turn around and become a smaller but strong one,” he said.

Jung warned that if a prepackaged plan, a combination of debt workout and court receivership, is initiated, the company would face stiffer restructuring including forceful cuts in jobs and production.

Meanwhile, the National Pension Service will demand additional documents from the troubled shipbuilder, it said Wednesday.

NPS Investment Management could not reach an agreement due to a lack of information, according to an NPS statement. “We will make a careful decision on the rescue plan after reviewing additional documents,“ it said.

Based on the documents, the national pension fund, which holds 390 billion won or almost 30 percent of the shipyard’s total corporate bonds, will have an investment risk committee meeting Friday to decide whether to go ahead with the financial aid.

To pass the debt restructuring plan, more than one-third of bondholders in terms of the total value are required to attend the meeting and more than two-thirds of those participants need to agree. At the same time, it needs one-third of bondholders in terms of numbers to back the plan.

By Park Ga-young (gypark@heraldcorp.com)