Ssangyong gets bankruptcy protection, but faces bumpy road ahead

(ATTN: ADDS share trading resumption in last para)
SEOUL, Feb. 6 (Yonhap) -- Beleaguered Ssangyong Motor Co. won court approval for
bankruptcy protection on Friday, clearing the first hurdle for a turnaround and
buying time to put its operations back on track.

The road ahead, however, is very bumpy for Ssangyong as it needs to battle to
present a radical job cut plan amid a sales collapse and a poor cash flow
stemming from the global economic crisis, analysts say.
The court receivership "doesn't mean that it guarantees rehabilitation," the
Seoul Central District Court said in a statement, announcing its decision to
accept Ssangyong's application.
If Ssangyong's self-rescue effort is deemed insufficient, the court could cease
its protection from creditors any time, it said.
Industry data show the per-capita productivity at Ssangyong, which employs 7,128
workers, is nearly one-third of Hyundai Motor Co.'s.
Unless Ssangyong proves to creditors its viability under court receivership,
which is similar to bankruptcy protection in the United States, they will
liquidate the company.
"This is not the end, but perhaps the end of the beginning," an auto analyst at a
local brokerage said on the condition of anonymity, referring to the Ssangyong
union's strong resistance to a jobcut plan.
"Also, the real question is how long the court and creditors will be willing to
support Ssangyong until the economy rebounds," said the analyst.
Ssangyong, a unit of China's Shanghai Automotive Industry Corp. (SAIC) and the
smallest carmaker in South Korea, became the nation's first high-profile victim
of the global financial crisis.
Upon court receivership, SAIC lost its management control in Ssangyong, but can
retain its 51-percent stake.
Analysts say, however, SAIC may give up its role as a major shareholder in
rehabilitating Ssangyong, given the automaker's dire financial positions.
Creditors, led by state-run Korea Development Bank, have estimated that Ssangyong
needs about 800 billion won (US$580 million) in new loans to stay afloat.
In the third quarter of last year, Ssangyong posted a net loss of 28.2 billion
won, marking the company's fourth straight quarterly loss. Ssangyong also
forecast a full-year net loss of around 100 billion won for all of 2008.
Currently, Ssangyong has a net cash reserve of 40 billion won, making it
impossible to repay promissory notes worth 150 billion won that mature in April,
according to the court's statement.
Compounding matters, a descent in Ssangyong's vehicle sales is accelerating as
consumers shied away from the potentially bankrupt company.
Last month, Ssangyong's auto sales plunged 82 percent to a mere 1,644 units. The
company has an annual production capacity of 200,000 cars.
Chung Mu-young, a spokesman at Ssangyong, said he "welcomed" the court's approval
and the company will make major efforts to get back on track.
Chung said Ssangyong will have to present a restructuring plan by June.
The court named Park Young-tae, Ssangyong's executive vice president, and Lee
Yoo-il, a former chief executive with Hyundai Motor Co., as co-managers to
determine the company's fate under court receivership.
Meanwhile, the bourse operator said trading of Ssangyong shares will be resumed
on Monday. Trading has been suspended since Jan. 9, when the company filed for
bankruptcy protection.
pbr@yna.co.kr
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