Application for corporate rehabilitation last year in severe liquidity crisis
Sluggish car sales increase difficulty in securing funds
Ssangyong Motor, which is suffering from a liquidity crisis, pays only half of the wages to its employees this month and next month. It withdrew from its Chinese business, which produced a deficit, and sold related assets.
According to the industry on the 25th, Ssangyong Motor CEO Ye Byung-tae posted a message on the company’s bulletin board that day and announced that 50% of the wages for January and February will be suspended.
President Ye said, “After applying for a postponement of individual consumption tax in January, we have no choice but to partially pay wages for January and February,” and said, “I have a heavy heart and no face to the arrival of such a worst situation.”
Ssangyong Motor, which has suffered a liquidity crisis last year through Mahindra’s withdrawal of investment, intensifying domestic competition, contraction in overseas demand, and problems with parts supply and demand, applied for corporate rehabilitation last December 21st.
Ssangyong Motor applied for an autonomous restructuring support (ARS) program to the court at the same time as the corporate rehabilitation application, and as the court accepted it, it was possible to conduct normal commercial transactions for two months to discuss the sale, but some parts makers paid for parts per day. Liquidity worsened as they demanded that they be settled in cash. Consumption sentiment for Ssangyong Motors deteriorated and sales contracted in January, a traditional low-demand season in the automobile industry.
President Ye said, “In the case of small business partners, they are paying for materials in cash.” .
“Even considering the traditional off-season, there are no more than 2,000 units sold than originally planned,” he explained. He said, “One of the reasons for the rapid deterioration of the fund balance is the fact that materials must be paid due to unpaid bills and partial settlement of bills due in January and February,” he said.
Ssangyong Motor recently completed the sale of its Chinese subsidiary’Ssangyong Railway Co., Ltd.’ and submitted related documents to the Seoul Rehabilitation Court. It is known that Ssangyong Motor also sold all remaining parts assets in the region.
The Chinese subsidiary, which Ssangyong Motors established in 2004 with the aim of entering China, has served as a sales agency for Ssangyong Motors in China, but the deficit continued. The total amount of assets decreased from 7 billion won in 2014 to 600 million won as of the end of September last year.
Meanwhile, Mahindra has formed and negotiated a consultative body to sell Ssangyong Motor’s stake to US automobile retailer HAAH Automotive, but is having difficulty finding an agreement until the 22nd, which is the time of negotiation set internally.
Ssangyong Motor received an audit opinion rejection from auditors for the first, second, and third consecutive quarters of last year. If an audit opinion is rejected in the upcoming annual report, the stock market may be delisted from the Korea Exchange.
There is a possibility of a last-minute conclusion, as the council is expected to hold additional negotiations by this week, but Ssangyong’s liquidity is getting worse and the issue of delisting overlaps, raising concerns from the industry.
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