Chinese-Owned Automaker Gets Time To Restructure
South Korean court accepted Ssangyong Motor Co.'s request for protection from creditors, buying time for it to try and restructure into a profitable automaker.
A South Korean court said it has accepted Ssangyong Motor Co.'s request for protection from creditors, buying time for the troubled Chinese-owned manufacturer of light SUVs to try and restructure into a profitable automaker.
Ssangyong is far smaller than domestic rivals Hyundai Motor Co. and Kia Motors Corp. Its troubles have drawn attention, however, amid turmoil in the world auto industry, which has been rocked by plunging demand for vehicles as a result of the global financial crisis.
The Seoul Central District Court accepted Ssangyong's application to rehabilitate under court protection, said court spokesman Hong Jun-ho.
Hong also said the court named former Hyundai Motor executive Lee Yoo-il and current Ssangyong executive Park Young-tae to run Ssangyong.
The company is majority-owned by Shanghai Automotive Industry Corp., one of China's largest vehicle manufacturers. Ssangyong filed for court receivership, or bankruptcy protection, last month amid falling sales and mounting red ink.
The South Korean company welcomed the court's decision, which it said showed "Ssangyong Motor has potentials and possibilities to revive." Ssangyong also said that the decision means that Shanghai Automotive Industry's management rights have been suspended.
Ssangyong, which has annual production capacity of 200,000 vehicles and 7,100 employees, is South Korea's fifth-largest automaker, manufacturing mostly SUVs and a luxury sedan, the Chairman.
Pyeongtaek, South Korea-based Ssangyong posted a net loss of 98.1 billion won ($70.9 million) in the first nine months of last year. It has yet to announce earnings results for the fourth quarter.
Ssangyong sold a total of 92,665 vehicles in 2008, down almost 30 percent from the year before. The majority were exported to Europe, China and other countries. Ssangyong does not export to the United States.
Ssangyong said last month its board has come up with a number of measures to cut costs such as seeking voluntary retirement and wage cuts for the next two years, among others steps.
SAIC's foray into South Korea has been plagued by tensions with Ssangyong's union, including a seven-week strike in 2006.
The company, which took over Ssangyong in 2004 and owns 51.33 percent of it, is a partner of General Motors Corp. and Volkswagen AG.
Trading in Ssangyong's shares, which fell nearly 85 percent last year, was suspended upon last month's court filing. Its then president, Choi Hyung-tak, resigned on the day of the filing.
The company intermittently suspended production over a three-week period until early this month amid a parts shortage.