Ssangyong Motor, Secured One Week of Parts Supply but... Small and Medium Suppliers Face Chain Bankruptcy Crisis

Sanggeorae Creditors Group Makes All-Out Effort to Persuade Foreign Partners and Political Circles

[Image source=Yonhap News]

[Asia Economy Reporter Ki-min Lee] Ssangyong Motor, which has been struggling with production disruptions due to repeated parts supply stoppages by foreign partner companies, is barely holding on with artificial respiration. Although foreign partner companies have agreed to resume parts supply next week following persuasion by Ssangyong Motor and the trade creditor group, the situation thereafter remains uncertain.

According to Ssangyong Motor and the trade creditor group on the 30th, foreign partner companies have agreed to supply parts normally until next week. Previously, after the Seoul Bankruptcy Court initiated court receivership for Ssangyong Motor on the 15th, foreign partner companies refused to supply parts from the 16th to the 23rd. In response, the trade creditor group, composed of Ssangyong Motor and its partner companies, has been persuading the foreign companies to continue delivering parts to Ssangyong Motor.

Foreign partner companies have refused deliveries and demanded payments at each critical juncture, including Ssangyong Motor’s voluntary restructuring (ARS) application at the end of last year, payment deferrals in February this year, and the initiation of rehabilitation procedures this month. Although Ssangyong Motor avoided shutdowns this week and next, foreign partner companies are still reportedly firm on resolving payment issues first. A parts industry official said, "From the perspective of foreign partner companies, they cannot disobey their headquarters’ directives, and if payments are not received, responsible personnel cannot avoid accountability."

With the continuity of supply from foreign partner companies uncertain and small and medium-sized partner companies also on the brink of collapse, there are observations that the current crisis is even more severe than during the 2009 court receivership. In particular, small and medium-sized partner companies are reportedly facing the worst financial conditions, which could lead to a complete halt in Ssangyong Motor’s factory operations. A trade creditor group official stated, "Currently, the financial difficulties of Ssangyong Motor’s small and medium-sized partner companies are worse than during the 2009 court receivership," adding, "If this continues, many small and medium-sized partner companies will inevitably go bankrupt, ultimately causing Ssangyong Motor’s production lines to come to a complete stop." The trade creditor group has identified about 50 companies at risk of bankruptcy among the 350 partner companies they are monitoring.

The trade creditor group plans to request alternatives from the National Assembly and the government to enable payment of delivery fees to foreign and small and medium-sized partner companies. They are seeking to have the Korea Credit Guarantee Fund provide special guarantees for approximately 200 billion to 300 billion KRW out of the 350 billion KRW in public claims related to Ssangyong Motor parts deliveries, allowing loans to be made. To this end, the trade creditor group pointed out that the Ministry of Strategy and Finance must contribute about 20 billion KRW to the Korea Credit Guarantee Fund. To prevent bankruptcies among small and medium-sized partner companies, the trade creditor group has delivered an appeal containing these details to Hong Ki-won, a member of the Democratic Party of Korea (Pyeongtaek Gap), seeking assistance.

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