ID :
95468
Thu, 12/17/2009 - 15:00
Auther :

(News Focus) Tough road ahead for Ssangyong Motor


SEOUL, Dec. 17 (Yonhap) -- A turnaround plan by Ssangyong Motor Co. was approved
by a bankruptcy judge on Thursday, giving the debt-ridden carmaker a chance to
revive its ailing business, though analysts say the company's future remains
uncertain.

Ssangyong, the smallest carmaker in South Korea, has been under court-approved
bankruptcy protection since February after its Chinese parent, Shanghai
Automotive Industry Corp., abandoned it amid the global economic slump.
The company's troubles deepened last summer after hundreds of fired workers
occupied the company's only plant for more than two months, halting production.
With the court's approval, Ssangyong's court-appointed managers say they will
seek foreign investors to raise much-needed funds.
But the company faces an uphill battle in its struggle to exit bankruptcy
protection because its line-up is focused on expensive, gas-guzzling
sport-utility vehicles.
While part of the turnaround plan calls for Ssangyong to introduce a crossover
utility vehicle code-named C200 next year, analysts say such efforts won't be
enough.
"Given the local car market where rivals launch five to six new models a year,
it's questionable that Ssangyong Motor can survive with only the one C200 model,"
said Kim Ki-chan, professor of auto-industry economics at Catholic University of
Korea.
"The key for the planned stake sale to foreign investors is in price," Kim said.
The Korean auto market is dominated by Hyundai Motor Co. and its affiliate Kia
Motors Corp., which account for more than 75 percent of the local market.
Lee Yoo-il, one of two court-appointed managers at Ssangyong, said before the
court's decision that the company would hire a stake-sale arranger in January
next year if its plan is approved.
"We are in contact with several overseas companies for the stake sale," Lee said.
Industry observers say Ssangyong may be put up for sale, with a price estimate of
between 300 billion won (US$254.7 million) and 400 billion won.
If all things go as planned, it will take about eight months for Ssangyong to
raise funds from the stake sale.
The longer it takes to sell the stake, the more it will drain the company's cash
resources, analysts say.
Under the turnaround plan, Ssangyong would cut the Chinese parent's holdings to
11.2 percent from 51 percent and repay some 1.23 trillion won in debt over the
next 10 years.
The plan also calls for Ssangyong to write down its debts at a ratio of three to
one.
But even with the court's approval, doubts persist over the company's viability.
In the first half of this year, Ssangyong's net losses reached 443 billion won.
Sales also plunged 66 percent from a year ago to 455 billion won, with operating
losses totaling 153 billion won.
(END)


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