Ssangyong Motor Finally Files for Court Receivership... What Will Happen to 220 Partner Companies?

[Asia Economy Reporter Suyeon Woo] Ssangyong Motor's filing for court receivership on the 21st has triggered red flags for the management of over 220 parts suppliers. Although parts companies have recently reduced their dependence on Ssangyong Motor due to a decline in production over the past few years, the disappearance of more than 100,000 units annually in the domestic automobile market is expected to have a significant impact on the entire parts industry.

According to the Korea Automobile Industry Cooperative on the 21st, as of last year, there were 219 parts suppliers delivering to Ssangyong Motor, accounting for 12.4% of all domestic automobile parts companies. However, the supply amount last year was 1.8088 trillion KRW, which is only 3% of the total domestic parts industry.

While this number may seem insignificant in the context of the entire domestic automobile and parts industry, for each company, Ssangyong Motor's entry into court receivership is a matter of life and death. An industry insider said, "Parts suppliers are already struggling due to strikes caused by labor disputes at automakers, but if an automaker enters court receivership, the impact could be much more direct and threatening."

Number of Complete Vehicle Tiered Partner Parts Suppliers / Source=Korea Automobile Manufacturers Association

Furthermore, the parts industry is concerned that the employment shock triggered by Ssangyong Motor may extend to its suppliers. Although Ssangyong Motor directly employs about 5,000 people, if the scope of employment extends to suppliers, tens of thousands of job losses are feared.

The government has promised financial support to prevent the bankruptcy of suppliers in order to resolve the crisis faced by suppliers. The Korea Development Bank and the Small and Medium Business Corporation have announced plans to provide maximum support for suppliers' financial difficulties through policy finance programs and loan maturity extensions. The Ministry of Trade, Industry and Energy, along with regional Small and Medium Business Administration offices, will operate a support team for suppliers to monitor the parts industry situation and seek one-on-one customized solutions.

However, despite these government efforts, the industry's response remains skeptical. Another industry insider said, "Even when the parts industry faced difficulties due to COVID-19, the government's financial support had high barriers such as credit ratings and sales volume requirements. It is questionable how many suppliers with weakened financial structures will meet the government's criteria."

This content was produced with the assistance of AI translation services.