Ssangyong Motor, a Terrifying D?j? Vu from 12 Years Ago... Shutdown for 3 Days Starting Today

Partial Refusal by Some Partners Causes Parts Procurement Disruption
Investors Leave, Including KDB Turning Away
"Crisis Comparable to 2009 Oksoe Strike"

If Payment Issues Aren't Resolved,
Next Week's Restart Remains Uncertain
Partners Appeal for "Substantial Government Support"

[Asia Economy Reporter Ki-min Lee] Ssangyong Motor, which was precariously standing on the brink of bankruptcy, finally shut down its operations on the 3rd. This was the result of parts supply stoppages by small and medium-sized suppliers following foreign companies, raising concerns that the shutdown period could potentially extend until after the Lunar New Year. To make matters worse, the departure of potential investor HAAH Automotive has left the pre-restructuring plan (P-Plan) shrouded in uncertainty. Inside and outside Ssangyong Motor, there is a widespread sense of crisis that the company could revert to the 2009 situation when the factory was unable to operate properly for 77 days due to a lock-in strike.

Ssangyong Motor announced that it would halt production line operations for three days from this day until the 5th. The reason given was "production suspension due to disruption in procurement of production parts caused by suppliers' refusal to deliver."

Earlier, when Ssangyong Motor filed for corporate rehabilitation on December 21 last year, suppliers, fearing non-payment, stopped deliveries on December 24 and 28. While small and medium suppliers later resumed supply, some large corporations and foreign parts companies that refused to extend contracts continued to halt deliveries, forcing Ssangyong Motor to purchase parts daily with cash. Then, on the 28th of last month, when Ssangyong announced its entry into the P-Plan and a payment deferral on promissory notes worth 200 billion won that had matured, large corporations and foreign parts companies again stopped deliveries. As a result, Ssangyong Motor repeatedly started and stopped factory operations on the 1st and 2nd of this month.

The problem is that resuming factory operations next week remains uncertain. Ssangyong Motor maintains that HAAH has not withdrawn its investment and that they are coordinating the P-Plan, but suppliers are unlikely to resume supply unless Ssangyong resolves payment issues. Already in a state of capital erosion, Ssangyong Motor’s only means to secure liquidity is through vehicle sales revenue. Although vehicle exports increased last month compared to the previous month, domestic sales amounted to only 5,648 vehicles, resulting in an 18.1% decrease in total sales, which is also unfavorable. Ssangyong Motor stated, "We will pursue negotiations with suppliers regarding deliveries."

The Industrial Bank of Korea, the only remaining hope, is also turning its back, saying that HAAH left Korea without submitting investment plans. HAAH had proposed investing $250 million (approximately 275 billion won) in Ssangyong Motor through a third-party capital increase and demanded corresponding support from the bank. However, in a press briefing on the Ssangyong P-Plan issue, the bank drew a line, stating, "The P-Plan is premised on investment by a potential investor," and "In the current situation where the potential investor has not made a decision, it is not at a stage to decide on financial support."

Because of this, there are concerns that Ssangyong Motor’s crisis is comparable to the 2009 situation during the so-called lock-in strike triggered by Shanghai Automotive’s abandonment and large-scale restructuring. At that time, the major shareholder Shanghai Automotive paid only half of the technology transfer fee, 60 billion won, and sent key researchers to its local headquarters in China. When Shanghai Automotive filed for court receivership citing liquidity problems and the company announced a large-scale workforce reduction plan, the union affiliated with the Korean Confederation of Trade Unions occupied the factory and went on strike for 77 days.

Kim Seok-kyung, Secretary General of the Ssangyong Motor Cooperative, lamented, "In this liquidity crisis, suppliers are divided between small and medium companies and large corporations on whether to continue supplying Ssangyong Motor or not," adding, "The situation is more complicated than in 2009."

Representatives of small and medium companies are planning to contact large corporations and foreign parts companies with whom they have communicated to request resumption of parts supply.

The Ssangyong Motor Cooperative Emergency Response Committee issued an appeal on this day, requesting government support for Ssangyong Motor. The committee stated, "Government emergency financial support programs for small and medium suppliers require high credit ratings and collateral, making them ineffective," and appealed, "We ask for practical government support so that all suppliers can continue to supply parts with hope for Ssangyong Motor’s normalization."

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