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No restructuring plan can save Hanjin
At the present time the primary difficulty with the ship freight industry is one of oversupply, and the gulf between capacity and demand is growing still further. Market conditions are reigning in even the most competitive companies: Maersk, the Danish conglomerate and a leading company in the sector, is cutting jobs and has cancelled an order for six of the huge Triple-E super tankers. In such an environment, Hanjin cannot hope to survive – the demand simply does not exist for such a company anymore. No matter the quality of the restructuring plan, resurrecting the company and returning to profitability bears all the hallmarks of a fantasy.
Given the South Korean government will not bail out the troubled company, the question of who will surfaces. Historically governments have bailed-out loss making industries; the reluctance to do so in this situation underlines how dire the future is. Consequently, the prospect of securing funding from another source looks slim, at best. With no obvious source of investment the company will not be able to undertake the alterations which are desperately required. The economic situation of both the industry and the company does not suggest any money will be forthcoming, meaning no matter how good the restructuring plan is, the company will soon expire.
Even if the company could somehow survive into the New Year, the problems would not end there. The industry relies upon return custom, and it is doubtful customers would return to Hanjin given the torturous recent past. Devoid of a strong reputation which imbues a sense of security, it is difficult to envisage how the once leading company can restore the brand image. Already owing large sums of money to charter companies, Hanjin would find it very difficult to negotiate a deal. Even before the latest crises, Seaspan had already rejected a compromise deal. Indeed, with one less player in the market, they may prefer such a situation.