(News Focus) Ssangyong Motor tips toward liquidation

By Kim Deok-hyun
SEOUL, Aug. 4 (Yonhap) -- South Korea's beleaguered Ssangyong Motor Co. is
driving closer to the edge of disaster as its suppliers prepare to ask a
bankruptcy judge to liquidate the carmaker, which has been paralyzed by a
months-long strike.
What remains unclear is what might happen to Ssanyong afterwards. The parts
suppliers are hoping to set up a new automaker, and there continues to be talk of
a government intervention.
Hundreds of fired Ssangyong workers have occupied a paint shop at the company's
only assembly plant in Pyeongtaek, about 70km south of Seoul, since May 22,
demanding their jobs back.
The workforce cuts were part of a turnaround plan ordered by a court in February
when Ssangyong, the country's smallest automaker, was granted bankruptcy
protection -- freezing its debts and obligations.
Last-ditch talks aimed at resolving the standoff collapsed Sunday as Ssangyong's
labor union, which has led the sit-in, rejected a compromise offered by the
management.
With no end in sight for the standoff, about 600 Ssangyong suppliers said they
will ask the bankruptcy court on Wednesday to liquidate the automaker. They plan
to create a new Ssangyong afterwards.
"Starting an the liquidation early and creating a new entity called 'Good
Ssangyong' is the most feasible way to save the company," said Choi Byung-hoon,
head of a group representing the suppliers.
Choi said the companies will convert the 276 billion won (US$219.2 million) they
hold of Ssangyong bonds into shares if the court accepts their request.
But a decision on that will likely not be made until after Sept. 15, the deadline
by which Ssangyong's management must submit its final restructuring plan. Even if
the judge accepts an early liquidation, whether a new Ssangyong would gain
viability or find a buyer is an open question.
Ssangyong's woes largely stemmed from shrinking demand amid the worldwide
economic crisis and a lack of investment from its Chinese parent, Shanghai
Automotive Industry Corp. Its line-up, dominated by sport-utility vehicles and
trucks, also became unpopular as fuel prices skyrocketed last summer.
In the first six months of this year, sales by Ssangyong, which has an annual
production capacity of 200,000 units, plunged 73.9 percent from the same period
last year to 13,020 units.
Kim Pil-soo, an automotive engineering professor at Daelim College near Seoul,
likened Ssangyong to a "patient diagnosed as brain-dead six months ago."
"Already, Ssangyong has passed its worst point," Kim said, adding the company
cannot be saved without taxpayer money.
Government officials and creditor banks have reiterated that they will not
provide direct support to Ssangyong.
"At this point, there is no way for the government to offer direct support," said
an official at the Ministry of Knowledge Economy, which oversees the auto
industry. "Measures (for suppliers) might be taken after the court's decision."
Ssangyong is still 51-percent owned by Shanghai Automotive Industry, but the
parent lost management control after Ssangyong entered bankruptcy protection.
Ssangyong posted a net loss of 710 billion won last year, with the labor dispute
costing the company 316 billion won as of Tuesday, according to a company
statement.
(END)