KAI Union Opposes Hanwha's Management Involvement: "Merger Must Be Blocked"

Supplier in Aerospace, Competitor in Space:
Concerns over Conflicts of Interest

Union Urges FTC to Block Deal, Vows Government Action if Approved

As Hanwha Group increases its stake in Korea Aerospace Industries (KAI) and moves to participate in management, the KAI labor union has called on the Fair Trade Commission to block the corporate merger. The union argues that, in the aerospace sector, Hanwha is a key supplier to KAI, while in the space sector, the two companies are competitors. This, the union claims, raises concerns about conflicts of interest and potential restrictions on competition.

Korea Aerospace Industries (KAI) Headquarters. KAI

On August 12, the KAI labor union issued a statement declaring, "We must not allow Hanwha, which is a supplier in the aerospace sector and a competitor in the space sector, to participate in KAI management." The union emphasized that the Fair Trade Commission should meticulously examine the potential limitations on competition resulting from the corporate merger.

The union highlighted Hanwha’s role as a major supplier to KAI as a key issue. It cited Hanwha Aerospace supplying engines for the T-50 series and entering a contract worth 473.1 billion won in 2024 for the first mass-produced batch of 17 different KF-21 components. The union also pointed out that Hanwha Systems supplies avionics equipment for the Light Armed Helicopter (LAH) as well as mission computers, multifunction displays, and infrared search and track systems (IRST) for the KF-21.

The union argued that if such a supplier were to become a major shareholder and exert influence over KAI's management, it could compromise independent decision-making regarding procurement and supply chains. If products from Hanwha affiliates are prioritized or if opportunities for competing parts suppliers are diminished, this could affect the competitiveness of domestic aerospace and defense subcontractors.

In the space sector, the union underscored the competitive relationship between the two companies. As evidence, it pointed to the fact that in 2023, the Agency for Defense Development (ADD) signed a contract with KAI for 67 billion won to develop the prototype of the ultra-small satellite system K model (SAR verification satellite), and also signed a separate contract worth 67.87 billion won with Hanwha Systems to develop the H model. Based on this, the union argued that the two firms are, in practice, competing for follow-up mass production contracts in the ultra-small satellite systems market.

The union further expressed concerns that Hanwha's participation in KAI’s management could create a structure granting access to sensitive competitive information, such as bidding prices, business costs, technology development strategies, partner and consortium composition, and R&D investment plans.

The union also cited Hanwha’s previous acquisition of Daewoo Shipbuilding & Marine Engineering as a relevant precedent. The Fair Trade Commission, during the 2023 merger review, imposed corrective measures due to concerns about competitive restrictions resulting from vertical integration between naval parts supply and shipbuilding. The union argued that, in the case of Hanwha and KAI, the overlapping supply relationship and space business competition require even stricter review.

Meanwhile, since November last year, Hanwha Group has been purchasing KAI shares, and as of August 10, it holds a 15.89% stake. Recently, it changed its purpose for holding these shares to 'participation in management.' Acquiring a stake of 15% or more in a listed company subjects the deal to a Fair Trade Commission merger review.

The KAI labor union stated, "To protect the independent competitive landscape of the aerospace and space industries, the merger between Hanwha and KAI must be blocked." The union added that, should the Fair Trade Commission approve or conditionally approve the merger, it will initiate a comprehensive struggle against the government.

This content was produced with the assistance of AI translation services.