Seoul: South Korean President Park Geun-Hye on Monday urged "bone-crushing" efforts to overhaul the nation`s ailing shipbuilders faced with mounting losses caused by slowing global demand and increased competition.
The South`s mighty shipbuilders including Hyundai Heavy Industries and Daewoo Shipbuilding and Marine Engineering have dominated the global market for past decades.
But a slump in oil prices and global economic slowdown sapped demand for tankers and container ships, while overcapacity, regional rivalry and the emergence of cheaper Chinese shipbuilders has squeezed profit margins.
The South Korean government and creditor banks, including state-run Korea Development Bank, have urged intense restructuring efforts including mass job cuts in recent months.
"The (shipbuilding) companies, along with creditor banks, should make bone-crushing efforts to revive their businesses," Park said in a speech to Seoul lawmakers.
"If we don`t carry out a bold restructuring by downsizing the overgrown workforce... and cutting costs, the future of not only the shipbuilders but also the whole economy will be in jeopardy."
Park warned of mass job cuts and an economic slump in the country`s southern region where the shipbuilders are based.
"The road for reform is painful... but, if we try to avoid it, our economy would be devastated and we would face even bigger pain in the end," Park said, adding Seoul would offer financial assistance and job training for those who are laid off.
The nation`s so-called "Big Three" shipbuilders including Hyundai, Daewoo and Samsung Heavy Industries racked up collective losses of 8.5 trillion won ($7.2 billion) last year.
They were hailed as a major driver of the country`s export-reliant economy -- Asia`s fourth-largest -- before being forced since last year to shed thousands of jobs and assets to stay afloat.
As exports sputtered and domestic demand slowed, South Korea`s central bank in April slashed the country`s growth outlook for this year to 2.8 percent from the previous three percent.
The economy expanded 2.6 percent last year, the lowest since 2012, as crushing household debts prompted more South Koreans to tighten wallets.
Total household debts have snowballed to reach a record 1,223 trillion won as of late March as wages stagnated and housing prices continued to rise.
The central bank also cut last week the key interest rate to a record low of 1.25 percent, saying it was aimed at easing the impact of corporate restructuring.
Seoul and state-run creditor banks have tried to put pressure on troubled industries, including shipbuilding and shipping, to reform and blaming a lack of competitiveness for their economic woes.