Ssangyong Motor to write off 80 pct of Shanghai Auto's stake

(ATTN: UPDATES with submission; CHANGES headline)
By Kim Deok-hyun
SEOUL, Sept. 15 (Yonhap) -- Ssangyong Motor Co., the embattled South Korean
carmaker, said Tuesday it will cancel most shares owned by its Chinese parent
Shanghai Automotive Industry Corp.


as part of a turnaround plan submitted to a
bankruptcy court.
The plan also calls for Ssangyong to convert 393 billion won (US$321.5 million)
in debts into new shares, the company said in a statement.
But the future of the automaker remains uncertain as its main creditor, the
state-run Korea Development Bank (KDB), has refused to provide further support,
analysts say.
Ssangyong, South Korea's smallest carmaker, entered bankruptcy protection in
February after its largest shareholder, China's Shanghai Automotive, which has a
51 percent stake in Ssangyong, abandoned the loss-making affiliate.
As part of restructuring efforts, Ssangyong had planned to cut 2,646 workers, or
36 percent of its workforce. About 1,700 employees left the company through
voluntary retirement packages, but the remaining workers occupied the carmaker's
only assembly plant for 77 days beginning in mid-May to protest the massive
job-cuts.
The occupation, marked by periodic violence, ended on Aug. 7 and further darkened
prospects for Ssangyong's survival, costing the company 316 billion won in lost
production.
Hit by the strike, Ssangyong's net loss widened to 177.1 billion won in the
April-June period. Sales for the same period plunged 66 percent to 221.7 billion
won.
Ssangyong is said to have total liabilities valued at 1.25 trillion won.
On Monday, an official at KDB reiterated that the bank will not provide new loans
for Ssangyong to develop a new model, deemed crucial for the carmaker's long-term
viability.
"There is no reason for creditor banks to offer funds for new-car development for
Ssangyong," the KDB official said.
Instead, Ssangyong should find private investors to raise fresh funds in the
process of bankruptcy protection, the official said.
The turnaround plan must be approved by creditors. The court will hold a meeting
with creditors on Nov. 6, but the date of voting has not yet been set, according
to Ssangyong officials.
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