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2M Alliance: Hyundai Merchant Marine deal is not a long-term solution
The agreement with the 2M Alliance marks an important step for Hyundai Merchant Marine. Despite the deal not meeting creditor demands, Hyundai M.M will have access to better business conditions than is possible under the soon to be defunct G6 alliance. Full membership, once the present agreement expires, has not been ruled out. Were the financial health of Hyundai to recover sufficiently the risk which deterred 2M customers would lesson, providing full access. The deal is not perfect and does not meet the memorandum of understanding signed earlier in the year, but it is a marked improvement on the alternatives. However, everything points towards the agreement being a stop-gap – it is not a long-term solution.
Alternatives were scant. Hyundai, facing likely bankruptcy if the recovery plan fails, needed to gain access to an alliance to provide the recovery plan with fresh impetus. The dire financial condition of the company, combined with the failure to secure the most lucrative Hanjin assets, ensured the board of Hyundai M.M was operating from a poor position which demanded they accept whatever deal could be agreed. Ultimately the company has achieved a working solution to some problems, but this arrangement very much points towards a ‘wait and see’ approach from 2M.
Only full membership of 2M can provide the conditions Hyundai Merchant Marine requires to survive what is expected to be more painful years for the shipping industry. There is reason to believe this could happen: charter fees have already been negotiated downwards and, having allowed five ships to be taken over by 2M, the company is accountable for fewer vessels. Given the memorandum of understanding signed this year, full acceptance HMM into the alliance will have to replace the current deal.