[단독]The government expands financial support for Ssangyong Motor’s partners… Easing policy fund review criteria

Input 2021.01.17 06:00

‘Ssangyong Motor Rehabilitation Procedures → Preventing the Spread of a Chain Crisis with Partners’
Expanded to all Ssangyong Motor’s subcontractors targeting the draft fund support program
Easing the standards for reviewing policy funds such as emergency management stabilization funds

Ssangyong Motor (003620)Has applied for legal rehabilitation procedures in the last 11 years, and the government has decided to push ahead with measures to significantly lower the financial support threshold for Ssangyong Motor’s partners.

The policy is to expand the target of the support programs for suppliers of the Basic Industry Stability Fund (Kan Fund) to all Ssangyong Motor’s suppliers, and to relax the criteria for support such as the Emergency Management Stability Fund. This is to prevent the possibility of a cascading bankruptcy due to Ssangyong Motor’s rehabilitation procedure, and to prevent Ssangyong Motor’s factory from being shut down due to parts supply and demand problems.

According to several government officials on the 17th, the government decided to operate a government-wide support group for suppliers and strengthen financial support for suppliers of Ssangyong Motors. This is to expand support to partner companies that have not received support due to failure to meet support standards such as credit ratings.

First of all, the targets for the draft fund will be greatly increased. Kian Fund’s support program for partner companies decided on the target of support after consulting with original companies such as Ssangyong Motors. For this reason, only a part of Ssangyong Motor’s recommendation was accepted. The government plans to increase the number of applications to all subcontractors of Ssangyong Motor. As of last year, there were 219 suppliers of Ssangyong Motor, and the amount of delivery was 1.8 trillion won. This is equivalent to 12.4% of all auto parts makers in Korea.

In addition, support standards for Ssangyong Motor’s partner companies, such as the’Give it up, Korea Special Operation Fund’ (Small and Medium Business Limit 50 billion KRW), and the Small and Medium Business Corporation’s Emergency Management Stabilization Fund (6 billion KRW), which previously received support applications from partner companies It plans to relieve some of it. Until now, there have been criticisms from the industry that it is difficult to receive actual payments even if a partner company applies for it because the conditions of support are difficult, such as providing credit guarantees or requesting a credit rating above a certain level.

A government official said, “In the past, only the companies recommended by Ssangyong Motors could apply for the funding, but we plan to increase this to all Ssangyong Motor partner companies so that new support is possible.” For programs such as the Emergency Management Stabilization Fund, the threshold will be lowered so that if Ssangyong Motor’s partner companies apply for it, it will be approved as the top priority.”

The government’s financial support for Ssangyong Motor’s partner companies is because Ssangyong Motor’s application for rehabilitation procedures is concerned about a chain bankruptcy crisis at parts makers. Due to the characteristics of the automobile industry, which is a downstream industry, the liquidity crisis of finished car makers can lead to a chain crisis of parts makers, which is a downstream industry, which can hurt the entire industry. For Ssangyong Motor’s normalization, it is important that suppliers do not stop supplying parts. This is because the possibility of Ssangyong’s recovery is high only when the production of finished cars continues with the normal operation of the factory.

Ssangyong Motor, which suffered a liquidity crisis due to a deficit for 15 consecutive quarters since the fourth quarter of 2016 and the withdrawal of investment by the parent company Mahindra, applied for a “autonomous restructuring support (ARS)” program with corporate rehabilitation procedures at the Seoul Rehabilitation Court on the 21st of last month. The court accepted Ssangyong Motor’s ARS application and decided to suspend the commencement of rehabilitation procedures for two months. If the stake is not acquired within the expiration of the period, the rehabilitation process will begin.

Such support for suppliers is also essential for the sale of Ssangyong Motors. It is reported that HAAH Automotive, an American automobile distributor, which is a promising share buyer, is also demanding the normal operation of the factory as a condition for the acquisition of Ssangyong Motor. If the plant is shut down due to problems such as parts supply and demand, Ssangyong Motor’s recovery will become more difficult. When the actual request for rehabilitation procedure was announced, some parts makers stopped supplying parts because they feared that they would not receive payment for the supply, and Ssangyong Motor’s Pyeongtaek factory had to stop the factory on the 24th and 28th of last month.

However, there is no situation in which the government can directly support Ssangyong Motor. This is because if the government directly supports a specific automaker, it is usually linked to the problem. This is because, based on the fact that the government directly provides cash, etc. to certain industries, other countries may raise trade issues with the World Trade Organization (WTO), saying that it is’unfair competition’. In 2015, the domestic financial sector provided about 12 trillion won to Daewoo Shipbuilding & Marine Engineering, which was in business difficulties, but the Japanese government raised a trade issue saying “it brought about low-cost competition internationally.”

An official from the Ministry of Industry said, “Because of the nature of the automobile industry, if a finished car company goes bankrupt, it will be a serious blow. We will actively try to minimize damage to our business partners. “We will double our efforts.”