Ssangyong Motor's 'Revival' Delayed Due to Some Partners' Supply Refusal

[Image source=Yonhap News]

[Asia Economy Reporter Ki-min Lee] Ssangyong Motor, which is running for recovery at the edge of a cliff, is facing difficulties in proceeding with the rehabilitation process as it hits the wall of 'refusal to supply' from its partners.

According to the industry on the 20th, Ssangyong Motor had planned to submit a pre-rehabilitation plan (P-Plan) to the court by the end of this month to quickly overcome the management crisis, but due to refusal to supply by some partners, the submission deadline was changed to early next month.

Ssangyong Motor is proceeding with the sale process by reducing Mahindra's stake (74.7%) and having HAAH invest $250 million to secure shares. Mahindra has also reached a consensus with Ssangyong Motor regarding the sale. Recently, as the price of the Pyeongtaek plant site rose, there were concerns that Mahindra's voting rights might be restored and reject the P-Plan, but Mahindra reportedly responded to Ssangyong Motor recently that it would agree once it receives final approval from the Reserve Bank of India.

Negotiations on the P-Plan and support with the main creditor bank, the Korea Development Bank (KDB), are also ongoing. Ssangyong Motor has set a business plan to produce and sell about 120,000 vehicles annually and launch the electric vehicle E100 in June this year, aiming to sell about 10,000 units annually, and is discussing this with KDB. Under the rehabilitation law, Ssangyong Motor needs the consent of the majority of creditors to submit the P-Plan, so the consent of KDB, which holds about 40% of Ssangyong Motor's debt, is essential. Additionally, HAAH insists that KDB should provide corresponding new funds on the condition that HAAH invests $250 million (about 280 billion KRW) in Ssangyong Motor.

The government also responds that Ssangyong Motor should be saved. On the 17th, Eun Sung-soo, Chairman of the Financial Services Commission, said at the National Assembly's Political Affairs Committee full meeting, "Since there is employment, if it is okay, saving (Ssangyong Motor) is fine," adding, "Whether it can survive should be judged industrially."

However, some partner companies, mainly foreign firms, are refusing to supply by demanding payment of unpaid promissory notes, causing setbacks to Ssangyong Motor's plans. Ssangyong Motor announced additional production stoppages from the 22nd to the 24th of this month. Except for the 1st, 2nd, and 16th of this month, production has been halted. If the refusal to supply continues, Ssangyong Motor's plan to produce and sell 10,000 units monthly will suffer a significant blow. Because of this, Ssangyong Motor and HAAH are reportedly coordinating again regarding the production plan.

Moreover, if these parts suppliers ultimately turn their backs on Ssangyong Motor, it is expected to be a considerable burden for the court to approve Ssangyong Motor's P-Plan. For the P-Plan to be approved by the court, the consent of secured creditors such as KDB (three-fourths), unsecured creditors such as trade creditors (two-thirds), and shareholders (half) is required. Officials from Ssangyong Motor and the partners' joint committee said, "For Ssangyong Motor to recover, normal production and sales activities must take place, so the resumption of supply by parts suppliers is urgently needed."

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