San-eun, Expansion of Financial Support for Ssangyong Motor's Partner Companies Possible (Comprehensive)

Low Utilization of Kian Fund but No Support for Ssangyong Motor
What About Partner Companies?
Operating 'Period Industry Partner Company Operating Fund Support Program' Within 40 Trillion Kian Fund
Expanding 'Cheer Up Korea Special Operating Fund' to 1.5 Trillion Won

[Asia Economy Reporter Park Sun-mi] As the financial difficulties of Ssangyong Motor and its suppliers worsen, there is growing speculation that KDB Industrial Bank may expand financial support for the suppliers.

According to the automotive and financial industries on the 4th, although Industrial Bank maintains its stance that Ssangyong Motor cannot be included in the list of recipients for the Industrial Fund for Stabilization of Key Industries (Industrial Fund), there is a possibility of additional support for suppliers using funds within the Industrial Fund, given that there have been cases of support for suppliers.

Since the launch of the 40 trillion KRW Industrial Fund in May last year, the only companies approved to use the fund so far are Asiana Airlines (2.4 trillion KRW) and Jeju Air (32.1 billion KRW). Based on the approved amount of financial support, only about 6% of the fund has been utilized. Ssangyong Motor has requested financial support through the Industrial Fund from Industrial Bank, but the bank continues to reiterate that "Ssangyong Motor is not eligible for Industrial Fund support" at this point.

To receive support from the Industrial Fund, three conditions must all be met: ▲borrowings of 500 billion KRW or more, ▲300 or more employees, and ▲direct difficulties caused by COVID-19. Industrial Bank does not consider Ssangyong Motor's problems to be due to COVID-19.

Industrial Bank Operating ‘Operating Fund Support Program for Key Industry Suppliers’ within the Industrial Fund

On the other hand, Ssangyong Motor’s suppliers have the opportunity to additionally utilize the Industrial Fund, which has low utilization rates and sufficient support capacity. Industrial Bank operates the ‘Operating Fund Support Program for Key Industry Suppliers’ within the 40 trillion KRW Industrial Fund. The program targets small and medium-sized enterprises selected as essential for maintaining the industrial ecosystem in collaboration with primary contractors and relevant ministries among the industries eligible for Industrial Fund support.

Even though Ssangyong Motor itself is not eligible for Industrial Fund support, the automotive industry is one of the nine industries eligible for the fund, alongside aviation, shipping, shipbuilding, machinery, steel, aircraft manufacturing, refining, and petrochemicals, so Ssangyong Motor’s suppliers can use the program. Since the program’s launch in August last year, a total of 93 companies have received 272.4 billion KRW in support, and it is known that many of these are Ssangyong Motor’s suppliers. The Industrial Fund Management Committee recently extended the loan period for the ‘Operating Fund Support Program for Key Industry Suppliers’ from early this month to the end of April, about three months, to continue financial support for small and medium-sized suppliers.

There is also speculation that Industrial Bank will expand support for Ssangyong Motor’s suppliers using the ‘Cheer Up Korea Special Operating Fund,’ which it operates separately from the Industrial Fund. This program supports suppliers in key industries including automotive, and the recent increase in the support limit from 1 trillion KRW to 1.5 trillion KRW has created room for additional support.

Choi Dae-hyun, Senior Vice President of Industrial Bank, recently stated in a briefing related to the Ssangyong Motor issue, "We cannot decide on financial support for Ssangyong Motor before the P-Plan without a sustainable business plan and management normalization measures," but regarding support for suppliers, he used the phrase "make maximum use" and mentioned the programs currently in operation.

An industry insider said, "If Ssangyong Motor goes into court receivership or bankruptcy, there could be criticism that Industrial Bank did not provide early support," adding, "Since Ssangyong Motor’s suppliers are appealing to the government for financial support, Industrial Bank will try to ease the burden by maximizing the use of existing support programs with ample capacity to expand support for the suppliers."

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