ID :
37565
Fri, 12/26/2008 - 20:59
Auther :
Shortlink :
https://www.oananews.org//node/37565
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Gov't not planning to directly help Ssangyong Motor Co.
SEOUL, Dec. 26 (Yonhap) -- The South Korean government does not plan to directly help Ssangyong Motor Co. deal with its present liquidity crunch caused by a sharp drop in sales, a government official said Friday.
Lee Dong-geun, head of the growth development office at the Ministry of Knowledge
Economy, told reporters after a meeting of a senior executive from Shanghai
Automotive Industry Corp. (SAIC) and South Korean policymakers that both sides
understand that direct support cannot be provided by Seoul.
"Under World Trade Organization rules, the government cannot interfere with
specific industries or companies, and any support can only be provided by
creditors and Shanghai Automotive, which is Ssangyong's parent company," he said.
Under current global trading rules, government support is limited to research and
development of eco-friendly cars, tax cuts to spur demand and help parts
suppliers, and support of financial institutions that can provide necessary
financing to help purchases.
"Seoul has about 40 billion (US$30.11 million) set aside for eco-friendly cars,
although this cannot all be given to one company, but has to be distributed to
laboratories and schools," the official said.
He pointed out that if overall market conditions improve and management and labor
agree on restructuring, the Korea Development Bank, the company's main creditor,
could extend loans to the cash-strapped company.
The official said that while there has been speculation that the Chinese company
may "walk away" from Ssangyong altogether, SAIC said it is willing to do its part
to save its affiliate if a compromise can be reached with union workers.
There has been speculation that up to half of the 7,000-strong workforce may have
to be cut, while some company insiders warned that the carmaker may file for
bankruptcy in January after failing to pay 25.4 billion won in wages this month.
Lee did not go into detail, but said Cheng Siwei, SAIC's vice chairman, pointed
out to Vice Minister Rim Che-min during the hour-long talks that the proportion
of labor cost to sales is higher for Ssangyong than Hyundai Motor Co. -- South
Korea's No. 1 carmaker -- hinting that Chinese entrepreneurs are dissatisfied
with rigid labor conditions.
SAIC acquired a 51-percent stake in Ssangyong for US$500 million in 2004, but the
company, which mostly produces sports utility vehicles, has suffered serious
setbacks in sales as high fuel prices and the global economic slump affect both
domestic and overseas sales.
In the third quarter of this year, the company lost 28.2 billion won, marking its
fourth consecutive quarterly loss. Last month, the automaker's sales plunged 63
percent from a year earlier to 3,835 units. The company said it needs to sell at
least 10,000 units a month to stay afloat.
yonngong@yna.co.kr
(END)
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Lee Dong-geun, head of the growth development office at the Ministry of Knowledge
Economy, told reporters after a meeting of a senior executive from Shanghai
Automotive Industry Corp. (SAIC) and South Korean policymakers that both sides
understand that direct support cannot be provided by Seoul.
"Under World Trade Organization rules, the government cannot interfere with
specific industries or companies, and any support can only be provided by
creditors and Shanghai Automotive, which is Ssangyong's parent company," he said.
Under current global trading rules, government support is limited to research and
development of eco-friendly cars, tax cuts to spur demand and help parts
suppliers, and support of financial institutions that can provide necessary
financing to help purchases.
"Seoul has about 40 billion (US$30.11 million) set aside for eco-friendly cars,
although this cannot all be given to one company, but has to be distributed to
laboratories and schools," the official said.
He pointed out that if overall market conditions improve and management and labor
agree on restructuring, the Korea Development Bank, the company's main creditor,
could extend loans to the cash-strapped company.
The official said that while there has been speculation that the Chinese company
may "walk away" from Ssangyong altogether, SAIC said it is willing to do its part
to save its affiliate if a compromise can be reached with union workers.
There has been speculation that up to half of the 7,000-strong workforce may have
to be cut, while some company insiders warned that the carmaker may file for
bankruptcy in January after failing to pay 25.4 billion won in wages this month.
Lee did not go into detail, but said Cheng Siwei, SAIC's vice chairman, pointed
out to Vice Minister Rim Che-min during the hour-long talks that the proportion
of labor cost to sales is higher for Ssangyong than Hyundai Motor Co. -- South
Korea's No. 1 carmaker -- hinting that Chinese entrepreneurs are dissatisfied
with rigid labor conditions.
SAIC acquired a 51-percent stake in Ssangyong for US$500 million in 2004, but the
company, which mostly produces sports utility vehicles, has suffered serious
setbacks in sales as high fuel prices and the global economic slump affect both
domestic and overseas sales.
In the third quarter of this year, the company lost 28.2 billion won, marking its
fourth consecutive quarterly loss. Last month, the automaker's sales plunged 63
percent from a year earlier to 3,835 units. The company said it needs to sell at
least 10,000 units a month to stay afloat.
yonngong@yna.co.kr
(END)
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