SsangYong reorganization stalls as main lender locks horns with new investor

Seen above is the entrance of SsangYong Motor's plant in Pyeongtaek, Gyeonggi Province. Yonhap

By Lee Min-hyung

Cash-strapped SsangYong Motor's reorganization plan is making little progress as main creditor Korea Development Bank (KDB) locks horns with the automaker's new investor, HAAH Automotive.

The U.S.-based vehicle distributor is known to have presented a plan to provide $250 million (282 billion won) financial aid for SsangYong's possible revival under the precondition that KDB offers a similar amount of financial support.

HAAH Automotive projected that SsangYong would incur losses of around 500 billion won to 600 billion won over the next two years before the investor completes legal and regulatory preparations for the sale of SsangYong vehicles in the U.S.

But KDB remained unwavering in its earlier position that the creditor would make its decision only after SsangYong and HAAH reach specific agreements over the automaker's revival roadmap.

"We do not have any plans to provide any form of financial support before SsangYong and the new investor draw up a revival plan," KDB Chairman Lee Dong-gull said in an earlier press conference.

Despite HAAH's request, the state-run lender reiterated that its position remains unchanged. According to KDB, SsangYong and HAAH should first present a realistic revival plan in order to convince the lender to inject capital. The state-run bank will then engage in a thorough review and decide whether to offer financial assistance.

The tug-of-war between KDB and HAAH is increasing the burden on the cash-strapped carmaker. Ssangyong sold only 2,789 vehicles here and abroad in February, down 60.9 percent from the same period last year. SsangYong's plant in Pyeongtaek, Gyeonggi Province operated for only three days last month after parts manufacturers refused to supply components.

"The status quo is a lose-lose game for any party," an investment industry source said. "Reaching a compromise between KDB and HAAH is the best-case scenario, but KDB appears unwilling to accept the request from the investor for the time being."

With SsangYong facing severe setbacks in its business due to the cash crunch, Korea's financial authorities urged the parties involved to make compromises and help the automaker get back on its feet quickly.

"If negotiations between the parties involved fail to progress smoothly for an extended period of time, this will incur economic and social damage here," Financial Services Commission Chairman Eun Sung-soo recently told reporters.

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