Hit by falling auto sales due to the global slowdown, SsangYong Motor of South Korea, said it has applied for court receivership to avoid bankruptcy. SAIC Motor Corp, the Chinese partner of global auto giants GM and VW owns a 51-per cent stake in SsangYong in the company.
Just two weeks after the automaker was turned down for new bank loans, the company said its parent Shanghai Automotive Industry Corp (SAIC) had decided on the move at an emergency board meeting on Thursday night.
Founded in 1954, it has been manufacturing automobiles for more than five decades. It began its business as a manufacturer of commercial vehicles such as trucks, buses, and special purpose vehicles including mixers and fire-fighting trucks.
In 1986, when the SsangYong Group acquisitioned Keohwa Motors specialized in manufacturing jeeps with the brand of Korando, and launched a full-scaled investment in automobile manufacturing. In 1988, it developed a compact 4WD SUV, Korando Family, which was the first SUV manufactured in Korea, opening the era of SUVs in the country. SsangYong Motor is the smallest of the 5 Korean automakers.
The company has passed through several ownerships. It is no longer part of the SsangYong Group (headed by SsangYong Corporation) after having been sold by the financially troubled group's creditors. Daewoo first bought the company but ran into troubles of its own, after which creditors at Chohung Bank ran SsangYong Motor. In 2005 China-based Shanghai Automotive Industry Corp. (SAIC) bought control of the company; it now owns just over 50 per cent of the Korean automaker.
The state-run Korea Development Bank, SsangYong's main creditor, said late last month that it would not consider new loans unless SAIC extended Ssangyong 320 billion won (HK$1.95 billion) of funding first.
After much hestitation, SAIC has finally agreed to inject 25.9 billion won ($19.89 million) into SsangYong Motor, a far lower amount than required by the cash-strapped automaker. nonethe less, the cash infusion has raised employee expectation to obtain their delayed paychecks. Ssangyong, which faces a possible liquidity problem, has been reportedly urged by SAIC for restructuring by axing more than 3,000 jobs, including half of some 5,200 assembly line workers, in return for the lifeline cash.
SsangYong had also received $45 million from SAIC for development services, including production of a new model that will be launched in Korea in the second half.
However, the funding is insufficient to save SsangYong from the net loss of more than 100 billion won in 2008, that it reported on 23 December due to a slump in demand. SAIC has also asked the South Korean government and banks to provide Ssangyong with financial support for the sustainable operation of the Korean automaker.
SsangYong's labour union disagrees to the preconditions listed by SAIC for the cash injection and may give a strike call against the possible job cuts.
The Korea Automobile Manufacturers Association has forecast that domestic sales by local automakers will drop 8.7 per cent next year to 1.05 million units, the lowest since the financial crisis in 1998.
Sales of imported vehicles in Korea increased 15.5 per cent last year over 2007, whereas sales of domestic cars slid 5.3 per cent in the aftermath of the global financial crisis.
December sales plunged 12 percent from a year earlier, despite importer discounts and low-interest instalment programs, clouding the outlook for this year.
Ssangyong expects to post a net loss of more than 100 billion won for last year.