Ssangyong Motor's fate hinges on restructuring plan, analysts say

SEOUL, Jan. 30 (Yonhap) -- While a local court is set to rule on Ssangyong Motor Co.'s bankruptcy protection as early as next week the troubled carmaker faces the tougher task of radical restructuring, analysts said Friday.

Ssangyong, owned by China's state-run Shanghai Automotive Industry Corp., filed
for court receivership on Jan. 9, making it South Korea's first high-profile
victim of the global financial crisis.
If the court accepts Ssangyong's application, the company's fate will be in the
hands of a court-appointed manager and creditor banks. And unless Ssangyong,
which employs 7,128 workers, can present a plan that would include job cuts and
asset sales to demonstrate its viability the automaker will be liquidated.
Last year, Ssangyong sold 81,445 vehicles. Hyundai Motor Co., which employs
55,742 workers domestically, sold 1.67 million vehicles. According to industry
data, that means Ssangyong's per-capita productivity is nearly one-third of
Hyundai's.
"Resuscitation or liquidation, the South Korean government and creditors will
take the lead in dealing with the matter of Ssangyong Motor," said Cho Su-hong of
Hyundai Securities.
"However, it won't be easy for them to come to a conclusion because the matter is
entangled with restructuring efforts," he said.
Cho added that the case of Ssangyong could become a litmus test for other South
Korean firms facing restructuring measures amid the deepening global economic
downturn.
Lee Joon-jae of Korea Investment & Securities echoed that view.
"Ssangyong Motor's application for court receivership signaled the need for
restructuring of the real economy," Lee said.
The labor union of Ssangyong, meanwhile, has already voted for a strike against
the restructuring plan, complicating the company's already difficult struggle to
turn itself around.
Knowledge Economy Minister Lee Youn-ho, who oversees the auto industry, hinted
last week the government won't save Ssangyong without a painful job-cut plan.
"Ssangyong Motor can't survive unless its management union agrees on a radical
restructuring," Lee told local business leaders.
Creditors, led by state-run Korea Development Bank, estimated Ssangyong needs
about 600 billion won (US$434 million) in new loans to stay afloat.
Ssangyong also has hundreds of subcontractors employing some 100,000 workers,
which makes the dangers of liquidation seem remote given the implications.
"We expect the court to accept Ssangyong's application for receivership, given
its economic impact on the local economy," Jung Jang-seon, chairman of the
Knowledge Economy Committee of the National Assembly, said during an interview
with a local radio program earlier in the day.
Ssangyong has total liabilities in excess of 800 billion won and assets worth two
trillion won, according to Jung.
"Given the value of its assets, we don't expect Ssangyong to be liquidated," said
Jung of the main opposition Democratic Party, whose constituency is based in the
city of Pyeongtaek, where Ssangyong has its sole assembly plant.
In the third-quarter of last year, Ssangyong reported a net loss of 28.2 billion
won, marking the fourth straight quarterly loss. Ssangyong forecast a full-year
net loss of around 100 billion won for all of 2008.
(END)