December 29, 2008 - Ssangyong Motor Company, Seoul South Korea

Ssangyong Motor Seeks Aid From South Korea

Ssangyong Motor Company, the ailing Korean automaker, and its Chinese majority shareholder, the SAIC Motor Corporation, are seeking help from the South Korean government to stave off a collapse of the company.

Ssangyong and SAIC, which owns 51 percent in the South Korean carmaker, said Monday they were seeking support from the government and banks to win badly needed financial assistance.

Although Ssangyong is the smallest of South Korea’s five automobile manufacturers and employs only 7,100 people, the appeal — the first from the industry in South Korea — will be closely watched as a test of how far the government, and state-controlled and other banks are willing to extend aid to the country’s car sector.

Banks in South Korea will begin screening companies in the construction and shipping sectors in January for possible assistance. Kim Jong-chang, the governor of the government’s Financial Supervisory Service, said last week that this aid plan did not extend to the car industry. But he left the door open to aid for automakers, saying the policy might change if the situation deteriorates further.

Manufacturers in the United States have already received emergency state aid, and even the Japanese car giant Toyota, which was well positioned thanks to its fuel-efficient cars, last week warned of a likely operating loss this year — an announcement that was widely interpreted as a sign of worse to come for the auto industry.

The slowing economy has prompted manufacturers everywhere to cut staff, output and planned investment. Hyundai Motor and its affiliate Kia Motors cut their joint 2008 sales forecast by 12.5 percent and announced they would freeze pay for managers. Ssangyong, which sold 87,125 vehicles in the first 11 months of 2008, down 27.4 percent from a year earlier, has halted production and delayed paying salaries.

SAIC, China’s largest automaker, and Ssangyong’s main creditor bank, the state-run Korea Development Bank, now appear locked in a dispute about who should bail out Ssangyong. The Korea Development Bank has called on SAIC to provide 120 million won, or $95 million, in cash promised for technology development, and to guarantee 200 billion won of loans from two Chinese banks to Ssangyong, a bank executive speaking on condition of anonymity said Monday. “These things must be done first before they come to the credit bank to ask for help. It’s a very basic procedure in business,” the official said.

SAIC, in turn, appears determined to wrest concessions from the unions, with whom it has had a fractious relationship since taking control of Ssangyong in 2004. SAIC, based in Shanghai, said in an e-mail statement Monday that Ssangyong was in talks with workers to cut labor costs.

Original Story - New York Times

Updated January 5, 2009

Ssangyong Motor workers vote on strike

Unionized workers at Ssangyong Motor began voting Monday on whether to strike if management demands massive job cuts as part of a restructuring of the ailing South Korean automaker.

News reports have said the carmaker — controlled by China's Shanghai Automotive Industry Corp. with a 51-percent stake — plans to slash more than 3,000 jobs, including half of some 5,200 assembly line workers.

Though the company denies those reports, the union says it is apparent that such plans are in the works.

"We can't sit idly by without doing anything in this situation," union spokesman Lee Chang-geun said of the reason to hold a two-day vote that will go through Tuesday.

Even if the 5,200-member union votes in favor of a walkout, it does not mean they will do so immediately. A strike would come if management proposes a specific restructuring plan that is not acceptable to the union, Lee said.

"We doubt job cuts would help" address the difficulties the company is facing, he said.

Ssangyong, South Korea's fifth-largest automaker, is far smaller than domestic industry leaders Hyundai Motor Co. and Kia Motors Corp. but with the global auto industry in a perilous state, its fate is being closely watched.

The company, which has annual production capacity of 200,000 vehicles and 7,100 employees, posted a net loss of 98.1 billion won ($74.1 million) in the first nine months of last year amid weakening domestic demand for SUVs — Ssangyong's mainstay vehicles. The company also produces the Chairman luxury sedan.

Lee also accused the Chinese parent company of stealing technology from Ssangyong, without making good on a promised investment in Ssangyong worth 1.2 trillion won.

Company spokesman Chung Moo-young said the company has no specific restructuring plan yet, but declined to elaborate.

SAIC has been under pressure to provide financial aid to the cash-strapped company that failed even to meet its December payroll.

SAIC sought the South Korean government's help to ensure Ssangyong's main creditor, Korea Development Bank, offers new loans to Ssangyong. But a senior official at Korea Development Bank said last week it won't provide financial assistance to Ssangyong Motor unless SAIC does so first.

SAIC took control of Ssangyong in late 2004.