Why did Ssangyong Motors face bankruptcy again?
Poor sales, suspension of investment by the largest shareholder, and relatively high wages are the causes. Even if new investors are found, investment expansion is urgently needed to secure competitiveness in the future car market.
▲ Byeong-tae Yee, CEO of Ssangyong Motors.
On the 23rd, Ssangyong Motor’s sales performance for the last 10 years was analyzed by selling 15,5754 finished cars in 2016, setting a record-high sales volume every year, and it is expected to show the minimum sales volume in 10 years since 2010.
Ssangyong Motor’s sluggish sales are intensifying every year, and sales declined from 1.2% in 2018 and 6.5% in 2019 to double digits this year.
Ssangyong Motors sold 9,6763 vehicles at home and abroad until November this year. It was 19.3% less than the same period a year ago.
If it is the current trend, it is not easy to sell 110,000 units this year, which is the worst performance since 8,215 units in 2010, which were under court management in the past.
After making operating profits in 2016, Ssangyong Motor has lost operating losses for the last 4 consecutive years. The size of the operating loss is also increasing every year to 39.9 billion won until the third quarter of this year following 64.1 billion won in 2018 and 281.9 billion won in 2019.
This is the reason that sluggish sales are one of the biggest causes of bankruptcy again after 11 years since 2009.
Ssangyong Motor has not secured a popular model to be featured after the small SUV (sport utility vehicle) Tivoli, which was launched in 2015.
At the beginning of last year, after 8 years since 2011, the Korando was ambitious to release a completely modified model, but it failed to gain popularity as it did not receive good reviews in the market due to its similar design to Tivoli.
Ssangyong Motors operates four SUV-focused models, such as Tivoli, Korando, Rexton, and Rexton Sport, so if one new car does not get a good response, the overall sales will inevitably shake.
In the last five years since 2015, for Tivoli, Hyundai, Kia, and GM Korea have been releasing competing models in the domestic small SUV market, and sales volume has dropped from 56,935 in 2016 to the level of early 20,000 this year.
In this situation, this year, Corona 19 overlapped.
The spread of Corona 19 accelerated the decline in Ssangyong Motor’s sales and at the same time called for the withdrawal of the investment plan of Mahindra & Mahindra, the largest shareholder.
Pawan Kuma Goenka, president of Mahindra & Mahindra, announced his plan to invest 230 billion won in Ssangyong Motor in January this year, but showed a willingness to normalize business, but the investment plan in April due to the sluggish delivery business due to the spread of Corona 19 Folded.
Mahindra & Mahindra faced difficulties in the management of its headquarters this year, as it was unable to sell a single car in India in April due to a city blockade due to Corona 19.
Since Mahindra & Mahindra’s investment of 230 billion won is more than Ssangyong Motor’s delinquent loan principal of 157.5 billion won, Ssangyong is regretting that Mahindra & Mahindra withdraws its investment.
If Mahindra & Mahindra showed a willingness to normalize management through large-scale investments, as in the case of GM Korea, additional support from KDB Development Bank, a creditor, may have been provided.
The relatively high wages are also pointed out as a chronic problem for Ssangyong Motors.
The average annual salary per employee of Ssangyong Motor exceeded 80 million won for the first time in 2016, but it rose to 89 million won in 2018 despite the deficit situation, and then slightly decreased to 86 million won last year.
The salary of 86 million won is the same as that of Kia Motors and LG Electronics. Kia Motors and LG Electronics posted operating profits of 1.5 trillion won and 166 billion won respectively on an individual basis last year.
Ssangyong Motor said that it would tighten the belt to cut costs, but it could not move the mind of the Korea Development Bank.
Lee Dong-geul, chairman of the Industrial Bank of Korea, said that even after Ssangyong Motor returned wages, reduced welfare, and sold assets to normalize its business, he also demanded that’Saimyeonsaeng Saengsaeng’ implement a more intensive self-reliance plan.
Even if Ssangyong Motor seeks new investors, it is unclear whether it will secure competitiveness in the rapidly changing future car market.
Unlike 2009, when Ssangyong Motors applied for corporate rehabilitation in the past, the center of the automobile market is rapidly shifting from internal combustion locomotives to eco-friendly vehicles such as electric vehicles.
Ssangyong Motor currently does not have a single eco-friendly car model, so long-term investment is required to secure competitiveness in the future car market.
▲ Image of the electric car’E100′ that Ssangyong Motors is preparing to launch in the first half of next year.
On the 22nd, Professor Pil-soo Kim of the Department of Automotive at Daelim University appeared on YTN Radio’s’Sleek Radio Life’ on the 22nd and said, “Ssangyong Motors will release the electric car E100 next year, but next year, about 20 electric cars with good cost performance will be released in Korea, including imported cars.” (In the future car era) It is not easy to find the strengths of Ssangyong.”
As the new Rexton recently released by Ssangyong Motors is causing a blast, there is also a view that if you take advantage of its strengths in the SUV market, you can have time to prepare for the future car era.
According to Bloomberg New Energy Finance (BNEF), even by 2025, electric vehicles account for only 10% of the global automobile market.
Although the electric vehicle market is growing rapidly, the internal combustion locomotive market does not disappear at an instant, so if Ssangyong Motor seeks a new investor, it is highly likely that it will have time to prepare for the future.
An official from Ssangyong Motors said, “We will do our best to transform into a more robust and competitive company by taking this crisis as an opportunity to conquer the phone.” [비즈니스포스트 이한재 기자]