(News Focus) Ssangyong Motor will likely get approval for court receivership

SEOUL, Feb. 5 (Yonhap) -- A South Korean court may have no other choice but to
decide this week to allow creditors of Ssangyong Motor Co. to take over the
ailing automaker in court receivership, analysts said Thursday.
The demise of Ssangyong, owned by China's Shanghai Automotive Industry Corp.,
would deal a critical blow to South Korea's automaking industry, they said, which
is struggling with shrinking demand and tight credit amid the global economic
crisis.
"For auto-parts makers, the assumption is that a bankruptcy of Ssangyong would
force many of them into insolvency," said KB Investment & Securities analyst Sohn
Myung-woo.
Ssangyong's efforts to stay afloat, however, still face a number of challenges
that may prove to be insurmountable, analysts say. The company is struggling to
come up with a restructuring plan that would call for radical jobcuts, while
there is a real possibility that creditors could liquidate the debt-ridden
carmaker.
A Seoul district court is widely expected to rule on Friday whether to accept
Ssangyong's application for court receivership. If granted, the automaker's
Chinese parent will lose management control and Ssangyong would then have eight
months to map out a restructuring plan.
The court has already named Park Young-tae, Ssangyong's executive vice president,
and Lee Yoo-il, a former chief executive with Hyundai Motor Co., as co-managers
to determine the company's future under court receivership.
"We will actively cooperate with the court-appointed managers to help normalize
operations at Ssangyong Motor," said Choi Byung-hoon, who heads a group of some
470 suppliers for Ssangyong.
Choi said the appointment of the two managers cleared the last hurdle for
Ssangyong's court receivership.
Ssangyong Motor officials acknowledged the appointment, but declined to comment
because the court has yet to officially announce the ruling on receivership.
Some analysts say that to become viable Ssangyong needs to let go of more than 30
percent of its 7,128 workers.
Last year, Ssangyong sold 81,445 vehicles, according to industry data, compared
to the 1.67 million vehicles sold by Hyundai Motor, which employs 55,742 workers
domestically. The numbers show that Ssangyong's per-capita productivity is nearly
one-third of Hyundai's.
Ssangyong's labor union, meanwhile, has already voted for a strike against a
possible jobcut plan, further complicating the company's already difficult
struggle to turn itself around.
"We will fight for a guarantee of full employment," said Lee Chang-geun, a union
spokesman.
Ssangyong, South Korea's smallest carmaker, became the nation's first
high-profile victim of the global financial crisis. Creditors, led by state-run
Korea Development Bank, have estimated that Ssangyong needs about 800 billion won
(US$579 million) in new loans to stay afloat.
In the third-quarter of last year, Ssangyong posted a net loss of 28.2 billion
won, marking the company's fourth straight quarterly loss. Ssangyong also
forecast a full-year net loss of around 100 billion won for all of 2008.
Compounding matters, Ssangyong's vehicle sales are plummetting.
Last month, Ssangyong said its vehicle sales plunged 82 percent as consumers
shied away from the potentially bankrupt automaker.
With an annual production capacity of 200,000 cars, Ssangyong sold a mere 1,644
units, with domestic sales diving 77 percent to 1,149 units and exports
plummeting 88 percent to 495 units.
So, what is the best option for Ssangyong's survival?
"If Ssangyong downsizes its workforce and is put up for sale again, the company
could find a buyer," said an industry analyst on condition of anonymity.
"After all, the union holds the key to Ssangyong's survival."
(END)