Chinese-owned Korean SUV specialist SsangYong Motor on Friday said it plans to use Korean receivership provisions to avoid bankruptcy while its president and CEO have both resigned.
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SsangYong’s move may give top shareholder, China’s SAIC Motor, a possible exit opportunity amid worries about overcapacity in the global auto industry, analysts in Seoul told the Reuters news agency.
If the court allows SsangYong to file, SAIC, which has a 51% stake in SsangYong, would keep its stake but relinquish control of the firm to the court, reports said.
“[Receivership] seems to be a way for SAIC to get out of SsangYong. SAIC appears unwilling to invest further in SsangYong as the global industry is facing an overcapacity problem amid slowing demand and it is not clear how much money would be necessary to revive SsangYong,” Kyobo Securities analyst Song Sang-hoon was quoted as saying, though SsangYong officials insisted SAIC would continue to play its role as the top shareholder and help the stricken automaker revive.
SsangYong also plans to cut wages by up to 30% and accept early retirement applications to revive its business.
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By GlobalDataSsangyong’s December sales were down 53% compared with a 13% fall in the combined sales of the country’s five auto makers and has also posted four consecutive quarterly losses, and had problems with unions on top of disputes between Chinese and Korean officials.
SAIC injected $45 million into SsangYong at the end of December last year, according to reports.
Some analysts think SAIC may now eye other automakers or brands instead of putting more money into SsangYong.
“There are better brands in the market now, which are waiting for new owners at attractive prices,” Tong Yang Securities analyst Kang Sang-min told Reuters.
Among the options: GM’s Saab and Hummer, up for ‘strategic review’ and Ford’s Volvo.
“SsangYong decided to file for court receivership to deal with an urgent liquidity crisis and to transform itself into a company with sustainable growth,” the company said in a statement.
The automaker has asked for government aid but been offered that only if SAIC itself puts more cash in.
Meanwhile, Ssangyong said both its president and chief executive officer (CEO) had resigned.
CEO Zhang Hai Tao stepped down due to changes within SAIC and president Choi Hyung-tak resigned for personal reasons, Ssangyong said in a statement cited by Reuters.
