Dong Geol Lee, 'Ssangyong Motor 2-Year Unpaid Leave Plan' Effectively Rejected

"Fixed Cost Reduction Effect Present but Insufficient to Judge Business Normalization"
"If a Sustainable Rehabilitation Plan Is Not Submitted, Year-End Completion of Rehabilitation Procedures May Be Disrupted"

[Asia Economy reporters Ki-min Lee and Sun-mi Park] Lee Dong-geol, chairman of the Korea Development Bank (KDB), coldly evaluated the Ssangyong Motor self-rescue plan, which centers on two years of unpaid leave, as "having a fixed cost reduction effect but insufficient to judge business normalization," effectively rejecting it.

The key reason is that the self-rescue plan prepared by Ssangyong Motor does not guarantee sustainability after rehabilitation. If Ssangyong Motor fails to present a drastic measure that includes a 'sustainable rehabilitation plan' as required by KDB, the plan to complete the rehabilitation process by the end of this year could also fall through.

According to the industry on the 15th, although Ssangyong Motor's labor and management have prepared a self-rescue plan for rehabilitation, skepticism is growing that KDB's financial support will be impossible at this stage. This is because Chairman Lee personally pressured them to prepare a stronger self-rescue plan.

The industry views the main reasons Ssangyong Motor failed to gain Chairman Lee's support as the weak self-rescue plan compared to the high amount of bonds, insufficient future innovation capabilities, and the absence of investors with management ability.

In particular, unlike the Ssangyong Motor labor union, which chose two years of unpaid leave without workforce restructuring, the industry points out that bold restructuring is necessary considering the large scale of rehabilitation bonds. When Ssangyong Motor entered corporate rehabilitation procedures in April, the amount of rehabilitation bonds, including retirement benefits, approached 700 billion KRW.

[Image source=Yonhap News]

Furthermore, the prolonged absence of future innovation at Ssangyong Motor is also a factor causing KDB to hesitate in providing support. After graduating from corporate rehabilitation in 2011, Ssangyong Motor's management situation worsened as ownership changed from Shanghai Automotive to India's Mahindra. Chairman Lee also pointed out that Ssangyong Motor has never normalized since undergoing court receivership in 2009, emphasizing, "It is unacceptable and not a solution to unconditionally nationalize and support insolvent companies. The key is how to enhance competitiveness." While global automakers have been rushing to launch electric vehicles for several years, Ssangyong Motor still produces only internal combustion engine vehicles mainly powered by diesel, and no electric vehicles have been released. The Korando e-Motion, an electric vehicle to be launched in Europe this October, is not a dedicated electric vehicle, so it remains uncertain how much customer response it will garner in the electric vehicle market.

The small number of companies expressing interest in acquiring Ssangyong Motor is also cited as a problem. Former preferred negotiators included HAAH Automotive, electric vehicle companies Edison Motors and K-pop Motors, and Park Seok-jeon & Company. However, KDB and the industry believe that a company with relatively solid financial status and management capability must appear to guarantee Ssangyong Motor's sustainable management. Professor Lee Ho-geun of Daeduk University’s Department of Automotive Engineering pointed out, "For Ssangyong Motor to recover, at least 1 trillion KRW is needed, and to develop new cars such as dedicated electric vehicles over 3 to 4 years and build competitiveness, more than 2 trillion KRW in funds is required."

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