Creditor bank rejects Ssangyong's fund request for new car model

SEOUL, Aug. 9 (Yonhap) -- The main creditor of Ssangyong Motor Co. has rejected a
request to fund the development of a new model that the beleaguered carmaker
claims is critical for its survival, financial sources said Sunday.
The carmaker, which was forced to halt operations for 77 days when hundreds of
unionized workers barricaded themselves inside the company's sole plant in
Pyeongtaek 70km south of Seoul, requested 150 billion won (US$122.5 million) to
develop and build a new compact sport utility vehicle called the C200.
The Korea Development Bank (KDB) notified Ssangyong managers it will provide
funds in the amount of 100 billion won for workers' severance pay and
restructuring, but not vehicle development, sources said.
Unionized workers went on strike after court-appointed managers laid off
employees to cut costs in the face of shrinking sales.
After marathon negotiations, the two sides agreed Thursday to end the strike,
with management agreeing to lay off fewer workers and put more on extended leave
without pay.
"We are in the process of determining the extent and time for offering more
funds, with more detailed requests likely to be made this week to get a clearer
idea of how restructuring will take place," a KDB official who declined to be
identified said.
However, he said money for the new vehicle, which received some positive reviews,
is not under consideration as the ability of the carmaker to survive is unclear.
"Just because labor and management have reached a compromise does not mean that
funds will be released," he pointed out, stressing that since Ssangyong is under
court receivership, any final call will have to be made by the court.
Other creditors have hinted that Ssangyong will probably have to be sold to a new
investor, reflecting measures taken by the government to find a prospective buyer
for the company so a merger and acquisition deal can take place.
They claimed that because Ssangyong's woes stem from shrinking demand amid the
worldwide economic crisis and a lack of investment from its Chinese parent,
Shanghai Automotive Industry Corp., there may be a need for a fundamental change.
In the first six months of this year, sales by Ssangyong, which has an annual
production capacity of 200,000 units, plunged 73.9 percent from the same period
last year to 13,020 units. The months-long strike also cost Ssangyong 316 billion
won in lost production.
Shanghai Automotive still owns a 51 percent stake in Ssangyong, but the Chinese
parent lost management control after the carmaker entered bankruptcy protection.
yonngong@yna.co.kr
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