Pilsoo Kim Director of Automobile Research Institute, Professor at Daelim University
Ssangyong Motor is the top priority that the automotive industry must solve this year. Depending on whether it is resolved, the impact on the domestic economy is enormous. It is also a problem with the survival of hundreds of thousands of people including 350 major suppliers, numerous subcontractors, workers and their families. It affects the consumers who own Ssangyong Motor and the related aftermarket market. The impact of the automobile industry on a country’s economy is so great.
Korea’s three minor companies, GM Korea and Renault Samsung, are also in a difficult situation, but Ssangyong Motors applied for court management late last year, and all three months of self-regulation are currently ending. It is a crisis situation that must be concluded by the end of this month at the latest. As the US automobile retailer HAAH, who had been negotiating for more than half a year, gave up negotiations, the possibility of going to court has increased.
With the exception of Mahindra, the parent company of Ssangyong Motor, which gave up everything, the P plan (pre-rehabilitation plan) prepared by partners, HAAH as well as Korea Development Bank became difficult, and a regrettable situation occurred. The biggest problem is that, although the parent company Mahindra is showing an irresponsible attitude, Ssangyong Motor is not showing the potential for recovery as it has reached its limit, such as the launch of a competitive new car.
The future of Ssangyong is too clear. At this point, the best scenario is urgently to raise an emergency rehabilitation fund of about 500 billion won and to freeze bonds of about 1 trillion won to extend the lifespan, but even this is skeptical about the possibility of survival. Experts have already sentenced Ssangyong to death. It is just a measure to extend the lifespan without taking responsibility when the future is determined.
Some say that the future value should be weighed according to the market principle and compared with the liquidation value. There is also a growing voice that we should allow it to be resolved naturally, whether it is maintenance or liquidation, rather than based on political logic. Even if there is pain right away, it is necessary to endure the pain that is being cut out before it becomes a more serious problem.
If so, will Ssangyong Motors surpass this year? It seems impossible at this point. The reason we looked at it positively was the strategy of freezing some costs through the P plan and putting in one or two new cars as a share of new investment and KDB to last 2-3 years. The Korea Development Bank stopped disputes until the surplus and placed a condition that the union accepts the terms of a three-year collective agreement, but this also has a precondition that Mahindra and other investor investments will take precedence.
If future investment is not premised, there is no room for government intervention, such as the Korea Development Bank, and there is no justification. Therefore, if we go to the current state, there will be court administration, there will be strong restructuring, and the vicious circle of the unions being shaken seems clear. Partners have already come out to stop supplying parts, and this negative situation is also affecting new car sales. Ssangyong Motor is on the verge of having no more cards to use.
There is not much time left to find new investors, so the most probable way now is to persuade HAAH to return to the US and bring it back to the negotiating table. It will be able to withstand about 2 to 3 years if it is given a 51% stake in HAAH and receives an investment of about 270 billion won, while some bonds are frozen with support from the Korea Development Bank and new cars are developed through new funds. If this becomes possible, there will be enough time to contemplate the future of Ssangyong.
There are variables. In 2018, when President Moon Jae-in visited India and mentioned the reinstatement of the dismissal to Chairman Mahindra, the government had set foot in the Ssangyong Motor issue. Mahindra is calling for government intervention on this basis. As the government hastily intervened in private companies, it was not possible to escape from the subject of responsibility. Therefore, I am curious whether the government will leave the worst situation in which Ssangyong Motors is decomposed in the air. On the one hand, there may be an unexpected way of passing the bomb to the next regime.
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