Ssangyong Motor Faces Production Disruptions for Half a Month This Month... Liquidity Vicious Cycle Repeats Amid P-Plan Difficulties

[Asia Economy Reporter Ki-min Lee] Ssangyong Motor is caught in a vicious cycle of liquidity problems as about half of its operations are shut down this month.

According to Ssangyong Motor on the 6th, the company, which halted operations at its Pyeongtaek plant from the 3rd to the 5th, announced that production will stop again from the 8th to the 10th.

The reason for the factory shutdown is the "supply suspension by delivery suppliers." Earlier, on the 29th of last month, Ssangyong Motor failed to settle promissory notes worth 200 billion KRW that had matured.

The Ssangyong Motor Cooperative, composed of small and medium-sized parts suppliers, agreed to defer payment of the promissory notes, but foreign and large corporate parts companies did not agree and stopped delivering parts.

With parts procurement immediately blocked, Ssangyong Motor repeatedly started and stopped factory operations on the 1st and 2nd of this month as well.

In effect, Ssangyong Motor has experienced production disruptions for about half a month this month. The company plans to resume production on the 16th, but if it fails to persuade the suppliers opposing the supply, the shutdown period will inevitably be extended.

Without support from the government or the Korea Development Bank, vehicle sales are essential to continue operations, but for Ssangyong Motor, the production halt is a painful situation where the vicious cycle of liquidity problems repeats.

Last year, Ssangyong Motor recorded an operating loss of 423.5 billion KRW, a 50.2% increase compared to 2019, and its capital erosion ratio reached 108.3%, putting it in a state of complete capital erosion.

Moreover, since Ssangyong Motor filed for rehabilitation procedures with the court last December, it has been paying cash daily to parts suppliers who refused delivery and supplying parts, resulting in a deferral of 50% of employees' salaries for January and February, making cash flow difficult.

Ssangyong Motor intends to proceed smoothly with the pre-rehabilitation plan (P-Plan) to establish a foundation for early business normalization, but amid the tug-of-war between potential investor HAAH Automotive and the Korea Development Bank, concerns among employees and small and medium parts companies are growing.

On the 4th, the Ssangyong Motor Cooperative Emergency Committee, composed of small and medium parts suppliers, appealed, saying, "The government's emergency financial support programs for small and medium suppliers require high credit ratings and collateral, making them ineffective," and "We request the government's practical support so that all suppliers can continue to supply parts with hope for Ssangyong Motor's normalization."

The Ssangyong Motor labor union also expressed in a statement the day before, "We apologize to the public for the management crisis of Ssangyong Motor," and "As we have kept the social agreement promised to the public for 11 consecutive years, if given another chance to survive, we will repay the public with vehicle development loved by the people, like the Tivoli that opened the era of compact SUVs," appealing to the government and creditors for support.

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