Ssangyong bailout depends on labor productivity improvement: gov't

SEOUL, Jan. 21 (Yonhap) -- Ssangyong Motor Co. must greatly improve labor
productivity in order to receive assistance from creditors, a government source
said Wednesday.

The Ministry of Knowledge Economy source, who declined to be identified, said the
company must take all necessary steps to raise productivity to global standards,
and that this view will be conveyed to its future management.
It said that if the court accepts receivership and appoints a caretaker CEO to
get the beleaguered company back on its feet, the carmaker must first pledge to
do its part before getting help from creditors or the government.
South Korea's smallest carmaker filed for court receivership on Jan. 9 after last
year's sales plummeted.
The company, whose majority shareholder is China's Shanghai Automotive Industry
Corp. (SAIC), has a line-up dominated by sport utility vehicles that were hit
hard by soaring fuel prices in mid-1980, and then by the global economic slump,
which caused people to cut spending and buy smaller, more economic vehicles.
The official did not specify what measures should be taken, but because it is
physically impossible for the carmaker to improve efficiency and productivity in
a short time, the only viable option open is to lay off workers.
He also said that SAIC must do its part to try to sell Ssangyong-made cars in
China by using its distribution network. The South Korean market is saturated at
present, with little room to absorb new output.
Industry experts said that of South Korea's five automakers, Ssangyong labor
productivity came in last, with the proportion of labor-related cost making up 20
percent of total vehicle price. This is roughly twice the average of rival
carmakers like Hyundai Motor Co. and Kia Motor Corp.
Others, meanwhile, speculated that the ministry in charge of the country's
industrial policies, creditors and the Financial Services Commission may have
reviewed Ssangyong's overall condition and decided to sell it. Cutting the number
of employees could help attract buyers.
Creditors, including the state-run Korea Development Bank, said the company may
still have 38 billion won in cash (US$28.1 million) left -- an amount that will
allow the carmaker to continue production for just one month. The carmaker's debt
as of late last year could amount to 800 billion won, with 150 billion won due in
April.
yonngong@yna.co.kr
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