Korea’s Ssangyong Motors has been struggling over the last few weeks to keep its doors open and employees paid, but the current economic slide has gotten the better of Korea’s fifth largest automaker, forcing Ssangyong to file for bankruptcy protection.
Ssangyong’s parent company — China’s SAIC — recently gave the Korean automaker a $19.9 million loan, but that lump sum wasn’t enough to stave off bankruptcy. Ssangyong reportedly owes its employees more than $21 million in back wages.
Although SAIC – which owns a 51.33 percent stake in Ssangyong – is hopeful that Ssangyong can emerge from bankruptcy relatively unscathed, it could be the Chinese automaker’s chance to get out from under the failing company. “(Receivership) seems to be a way for SAIC to get out of Ssangyong,” Song Sang-hoon, an auto analyst at Kyobo Securities, told Automotive News. “SAIC appears unwilling to invest further in Ssangyong as the global industry is facing an overcapacity problem amid slowing demand and it is not clear how much money would be necessary to revive Ssangyong.”
If the Korean court approves Ssangyong’s bankruptcy filing, SAIC will retain its majority stake in the automaker but will have to give up control to the court.
But Ssangyong’s failure could be a blessing in disguise for SAIC. There are a number of far stronger brands than Ssangyong currently up for sale, including Hummer, Saab and Volvo . SAIC hasn’t targeted any of the aforementioned marques specifically, but has shown interest in swapping out Ssangyong for a better performing brand. In the five years SAIC has owned Ssangyong, its investment has been de-valued from $500 million to $271 million.
Ssangyong’s December sales plummeted by 53 percent, compared to just a 13 percent dip for the rest of Korea’s automakers.
