A plan to privatize Korea Aerospace Industries, the nation’s sole aircraft manufacturer, faces growing opposition from union workers and local residents.

Civic groups and local politicians also oppose the move.

KAI’s largest share holder is the Korea Finance Corp. with 26.41 percent stake. The state-run financier and three other major shareholders plan to sell a stake of about 40 percent (worth about $1 billion) in KAI within this year. The other three owners are Hyundai Motor Group, Samsung Techwin and Doosan Group, which each hold 10 percent.

KAI officials said the company would seek a bidder which bears the capacity to contribute to the growth and prosperity of the Korean aerospace sector.

But KAI’s labor union is opposing the plan, claiming that it should remain a state-run corporation or be led by an association of public aerospace organizations.

“Running an aerospace industry involves (a chain of) long-term investment. And each investment takes a huge amount of money,” a union official told The Korea Herald.

There are also concerns among union members that the privatization, if realized, will lead to large staff cuts. A union official said if a private company with its own subcontractors takes over the management, the subcontractors of KAI could face downsizing or be forced to break off their partnership.

Civic groups and local politicians in Sacheon, South Gyeongsang Province, where KAI is headquartered, also oppose the plan.

Last week, the provincial council adopted a resolution opposing the sales of KAI.

“The privatization aimed at handing over the KAI ownership to a certain conglomerate will cause a controversy over a business favor, eventually leading investors to turn their back,” according to the resolution. “Moreover, the new buyer’s focus on profit-taking will weaken the nation’s defense improvement projects.”

South Gyeongsang Governor Kim Doo-kwan, who is seeking to run in the December presidential election, also expressed his opposition to the KAI plan.

During his recent visit to Sacheon, he said whether to sell stake in KAI should be discussed after the new government is inaugurated early next year.

Residents in Sacheon worry that the privatization would negatively affect their local economy because of a possible relocation of the KAI headquarters and its subcontractors, saying it could dissemble the “Sacheon Aerospace Cluster.”

An association of civic groups in Sacheon also held a press conference last week and vowed to block the plan using all possible means.

In response, KAI officials said Friday that the relocation of its headquarters has not been discussed, considering the bid is still in its first phrase.

In contrast, the labor union pointed out that if Korean Air wins the bid, transfer to its Gimhae-based plant will be a possible option.

The public announcement on the bidding on KAI is due to be made in July and the final outcome is expected to be announced by October.

KAI was inaugurated in 1999 after taking over three financially-troubled aerospace firms ― Samsung Aerospace, Hyundai Space & Aircraft and Daewoo Heavy Industries’ aerospace division.

Since then, the plane maker has shed about 1,000 employees in restructuring and the government has poured about 8.6 trillion won ($7.4 billion) in public funds.

As a result, KAI posted 1.28 trillion won in sales anda 106 billion won in operating profit last year.

The company raised 567.5 billion won in an IPO in June last year.

The company won its first overseas order for the T-50 trainer jet last year and it signed a record $1.2 billion order for Airbus SAS wing components in March.

By Chung Joo-won (juwonc@heraldcorp.com)