Gov't to stop support for Ssangyong Motor suppliers

SEOUL, Jan. 30 (Yonhap) -- The government will discontinue assistance for hard-pressed parts suppliers of troubled Ssangyong Motor Co. in the face of worsening economic conditions, an official said Friday.

Hit by slumping sales and a subsequent cash squeeze, Ssangyong Motor, controlled
by China's Shanghai Automotive Industry Corp., filed for court protection from
creditors on Jan. 9, pushing many parts suppliers to the brink of bankruptcy.
"No new preferential relief can be implemented, including measures to ensure
payment of maturing notes issued by Ssangyong to suppliers, since corporate
restructuring efforts are taking place across the board," said the official at
the Ministry of Knowledge Economy.
"At this stage the government's policy is to allow the financial sector and the
market to determine what assistance can be given to these companies," he said,
asking not to be identified.
The official said Ssangyong suppliers experiencing difficulties should apply for
the so-called "fast track" support plan and join various self-help programs
jointly sponsored by the government, banks and large companies to help small and
medium-sized enterprises (SMEs).
Both measures are designed to prevent healthy SMEs from going bankrupt due to the
downturn in overall economic conditions not directly related to their own
operations.
The change in the government's stance is expected to cause Ssangyong suppliers to
engage in stringent workout programs to cut waste, streamline operations and find
new buyers.
Industry insiders, meanwhile, said if there is no further assistance, companies
that sold most of their products to Ssangyong may declare bankruptcy because they
have no alternate source of revenue.
In connection to the government's decision to allow the market to decide the fate
of Ssangyong suppliers, local banks said they would not pay the 64 billion won
(US$46.2 million) in notes maturing within the day and will move to get companies
that borrowed using these notes as collateral to shift to regular loans. About
93.3 billion won worth of Ssangyong issued notes come due this month.
"The decision to get companies to change to secure regular loans will be
implemented on a company-by-company basis depending on the health and future
prospects of each company," said a Shinhan Bank official.
Financial sources said that even if some companies are unable to pay back loans,
they may avoid bankruptcy because banks can reschedule payment dates and may
consider offering fresh funds.
yonngong@yna.co.kr