The South Korean government will discontinue assistance for struggling parts suppliers to Ssangyong in the face of worsening economic conditions, an official said Friday.
Hit by slumping sales and a subsequent liquidity crisis, SAIC-owned Ssangyong filed for court protection from creditors on January 9, pushing many parts suppliers to the brink of bankruptcy.
“No new preferential relief can be implemented, including measures to ensure payment of maturing notes issued by Ssangyong to suppliers, since corporate restructuring efforts are taking place across the board,” said the official at the Ministry of Knowledge Economy, Yonhap reported.
“At this stage the government’s policy is to allow the financial sector and the market to determine what assistance can be given to these companies,” he said, asking not to be identified.
The official said Ssangyong suppliers experiencing difficulties should apply for the so-called “fast track” support plan and join various self-help programs jointly sponsored by the government, banks and large companies to help small and medium-sized enterprises (SMEs).
Both measures are designed to prevent healthy SMEs from going bankrupt due to the downturn in overall economic conditions not directly related to their own operations.
The change in the government’s stance is expected to cause Ssangyong suppliers to engage in stringent workout programs to cut waste, streamline operations and find new buyers, the Yonhap report said.
The report added that some suppliers were likely to face bankruptcy as a result of the change in government stance.