[CarTalk Forest] "Please prepare loan measures," Ssangyong Motor partners in distress

Semiconductor Shortage and Reduced Supply Cause Financial Difficulties
High Threshold for Guarantee Fund Limits Utilization
Loan Request Secured by Public Bonds

[Image source=Yonhap News]

[Asia Economy Reporter Ki-min Lee] If Ssangyong Motor signs a memorandum of understanding (MOU) for a merger and acquisition (M&A) with the Edison Motors consortium, the Seoul Bankruptcy Court is expected to soon conclude the rehabilitation process. However, Ssangyong Motor’s suppliers, who are already facing financial difficulties, say they are anxious even as Ssangyong’s rehabilitation is imminent.

Since Ssangyong Motor entered the rehabilitation process, its suppliers have cooperated by delaying payment for delivered goods and have continuously provided parts. Now, they are facing a situation where it is difficult to endure the accumulated financial pressure.

Due to chronic financial difficulties, some first-tier suppliers primarily delivering to Ssangyong Motor have either given up on supplying to Ssangyong or have shut down their companies entirely. As a result, the remaining suppliers have taken over their volumes and are producing parts necessary for Ssangyong Motor’s manufacturing.

With Ssangyong Motor switching from a two-shift to a one-shift system, sales have decreased, and recently, the prolonged shortage of automotive semiconductors has further worsened the financial difficulties of suppliers. Completed vehicle manufacturers with better cash mobilization capabilities than Ssangyong Motor are directly contacting semiconductor companies to secure volumes for their suppliers’ parts production or are importing semiconductors at prices more than ten times higher from overseas black markets known as stock markets.

However, Ssangyong Motor’s suppliers, lacking financial flexibility, cannot afford the skyrocketing semiconductor prices and are idling their factories. This has led to a decline in Ssangyong Motor’s production volume, and a vicious cycle is repeating where suppliers stop factory operations in line with Ssangyong’s production.

Because of this, suppliers believe there is a high possibility that the new car development plan proposed by Ssangyong Motor as a rehabilitation measure will also be delayed. A representative of the trade creditor group composed of suppliers said, “Regarding the mid-size sport utility vehicle (SUV) J100 that Ssangyong plans to launch next year, suppliers already struggling financially have only received 20% of the parts development costs,” adding, “At this rate, it is questionable whether the vehicle can be released as originally planned early next year.”

Suppliers are requesting government assistance, considering the reality that even if Ssangyong Motor welcomes a new owner, it will be difficult to repay the overdue delivery payments all at once. Of course, they are not asking for free support. They are requesting loans secured by the Ssangyong Motor public bonds they currently hold.

Although the government, along with Gyeonggi Province and the Korea Credit Guarantee Fund, established a liquidity fund of 75 billion won in June, the loan conditions are so stringent that very few companies have utilized it. A representative of a Ssangyong Motor supplier said, “The size of the fund is just a drop in the bucket, and the loan qualifications and conditions are so strict that many companies have gone to the window only to turn back,” adding, “We are so anxious that we feel like we are burning up, and we hope the government will prepare a realistic loan plan.”

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