Two Weeks Before Entering Rehabilitation Procedure... Full Effort to Untangle P-Plan and Production Resumption

[Image source=Yonhap News]

[Asia Economy Reporter Ki-min Lee] Ssangyong Motor, with about two weeks left until the commencement of rehabilitation proceedings, is focusing its efforts on preparing a pre-rehabilitation plan (P-Plan), considered a last resort, and resuming production.

According to industry sources on the 13th, Ssangyong Motor plans to obtain the creditors' consent and submit the pre-rehabilitation plan to the court by the 28th of this month, when the decision to commence corporate rehabilitation proceedings is postponed, and then proceed with the P-Plan.

Ssangyong Motor filed for corporate rehabilitation with the court on December 21 last year and entered into autonomous restructuring (ARS). Ssangyong Motor, its major shareholder Mahindra, potential investor HAAH Automotive, and the main creditor bank, Korea Development Bank, formed a four-party consultative body to negotiate the sale, but Mahindra withdrew from the negotiations.

Subsequently, Ssangyong Motor and HAAH decided to proceed with the P-Plan, reducing Mahindra's shareholding and investing $250 million (approximately 280 billion KRW). However, HAAH insists that Korea Development Bank must provide a corresponding amount to maintain Ssangyong Motor's business viability. On the other hand, Korea Development Bank counters that support can only be provided if a plan to maintain Ssangyong Motor's business viability is established.

Industry insiders have expressed a bleak outlook, noting that the HAAH negotiation team left for the United States earlier this month and that Korea Development Bank is not favorable, making it difficult to proceed with the P-Plan. Additionally, the rise in asset value due to the listing of Ssangyong Motor's Pyeongtaek plant site may also affect Mahindra's voting rights related to the P-Plan.

However, Ssangyong Motor plans to promptly prepare the P-Plan and achieve corporate normalization. An industry official said, "Ssangyong Motor is continuing negotiations through a domestic law firm representing HAAH."

Ssangyong Motor is also accelerating efforts to resume deliveries from partner companies, which are trade creditors, and to gain cooperation for the P-Plan. On the 29th of last month, some partner companies refused to deliver after Ssangyong Motor failed to settle matured promissory notes, causing production disruptions throughout this month. Although about 90 companies initially notified delivery refusals earlier this month, the number of delivery-refusing partners decreased to about 30 following persuasion by Ssangyong Motor and the Ssangyong Motor Cooperative Association, a group of parts suppliers.

However, many companies still refuse to supply unless promissory note settlements are made first, leaving it uncertain whether production can resume on the 16th of this month.

Small and medium-sized suppliers to Ssangyong Motor are on the brink of collapse and are appealing for Ssangyong Motor's normalization and active government cash support. The Cooperative Association issued an appeal earlier this month, stating, "Emergency financial support programs from the government for small and medium suppliers require high credit ratings and collateral, making them ineffective," and requested, "Please provide practical government support so that all partners can continue supplying parts with hope for Ssangyong Motor's normalization."

A parts supplier official lamented, "Among Ssangyong Motor's small and medium suppliers, some employees who have not been paid salaries have already left the company," adding, "Government and Korea Development Bank support is urgently needed before a chain bankruptcy occurs."

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