Ssyangyongcha in 'Rehabilitation Process', 17 Consecutive Quarters of Losses... Union and Partners Say "Government Support Crucial"

by Lee Kimin

Published 19 May.2021 13:00(KST)

[Image source=Yonhap News]

[Asia Economy Reporter Ki-min Lee] Ssangyong Motor, which is undergoing corporate rehabilitation procedures, recorded losses for 17 consecutive quarters and received a disclaimer of opinion from auditors for the fifth consecutive time. Although the deficit has somewhat decreased, there are concerns that proactive restructuring and government support are urgently needed for the company to return to normal.

According to industry sources on the 19th, Ssangyong Motor posted an operating loss of 84.7 billion KRW in the first quarter of this year. This represents about a 14% decrease in losses compared to the same period last year. The net loss for the period was significantly reduced to 86.3 billion KRW from 193.5 billion KRW in the same period last year. Sales revenue was 535.8 billion KRW, down 17.5% compared to the first quarter of last year, and sales volume also decreased by 22.9% year-on-year to 18,619 units.

Ssangyong Motor launched new models such as The New Rexton at the end of last year, followed by The New Rexton Sports & Khan and Tivoli Special this year, and conducted aggressive marketing campaigns offering various discounts. However, after Ssangyong Motor filed for corporate rehabilitation at the end of last year, some parts suppliers stopped deliveries, causing production disruptions and a decline in sales.

As a result, the auditor, Samjong Accounting Corporation, issued a disclaimer of opinion on Ssangyong Motor, which has recorded losses for 17 consecutive quarters. This is the fifth consecutive disclaimer since the first quarter of last year. Samjong Accounting Corporation explained, "Current liabilities exceed current assets by 843.2 billion KRW, and the company is preparing a rehabilitation plan after receiving a decision to commence rehabilitation procedures, raising significant doubts about its ability to continue as a going concern."

In its business report last year, Ssangyong Motor received a disclaimer of opinion, triggering delisting reasons, and after asset revaluation, filed an objection with the Korea Exchange. The Korea Exchange granted a grace period until the submission of the audit report for this fiscal year. Due to the asset revaluation, the capital impairment ratio of Ssangyong Motor decreased from 111.8% at the end of last year to 86.2% as of the end of March.

[Image source=Yonhap News]

The trade creditor group, composed of Ssangyong Motor’s labor union and partner companies, insists that government support is urgently needed. On the 17th, the Ssangyong Motor labor union began a walking march to promote early normalization of the company. Starting from Ssangyong Motor’s headquarters in Pyeongtaek, Gyeonggi Province, they plan to conduct public awareness campaigns at key locations such as Suwon, Anyang, and Seoul, and deliver a petition to the National Assembly on the 20th.

The union argued that considering the proactive self-rescue measures implemented through labor-management cooperation, including cost reductions of 120 billion KRW and the sale of non-core assets worth 200 billion KRW, as well as the wage payment deferral of 50% since January this year to pay suppliers, it is now time for the government to provide support.

The union emphasized, "For the early normalization of Ssangyong Motor, planned releases of eco-friendly and future vehicle models must proceed without disruption, but under the current circumstances, securing new funds for investment is a critical task," adding, "Ssangyong Motor must promptly conclude the corporate rehabilitation process and contribute to the nation and local communities, and therefore, new loans and other financial support must be prioritized as soon as possible."

The trade creditor group also delivered an appeal containing these points to Hong Ki-won, a member of the Democratic Party of Korea (Pyeongtaek Gap). Due to the commencement of Ssangyong Motor’s corporate rehabilitation procedures, 350 billion KRW in overdue payments for deliveries have been tied up as rehabilitation claims, putting small and medium-sized partner companies in difficulty. They requested that the National Assembly unite to allow loans secured by some of these claims. According to the trade creditor group, about 50 out of 350 partner companies are on the brink of bankruptcy.