It was reported in June this year that Ssangyong is looking for a potential buyer after India’s Mahindra and Mahindra said it could give up its majority stake in the struggling company. Now the troubled South Korean automaker has filed for bankruptcy after it failed to make a loan repayment of about Won 60 billion ($54.4m). Ssangyong said in a statement that the move will cause a massive disruption in its operations.
Mahindra in 2010 had rescued SsangYong from bankruptcy and currently holds a 74.65% share of the company. However it had no success in turning things around for Ssangyong. The automaker has failed to extend its recent deadlines for repaying loans totaling Won 60 billion to three foreign banks including Bank of America, JPMorgan Chase and BNP Paribas. Ssangyong also has Won 220 billion in short-term borrowings and is facing a liquidity crisis with Mahindra refusing to make any new investment.
Although South Korean government has deployed unprecedented financial stimulus measures to help soften the blow from coronavirus, including direct support for struggling industrial groups, analysts believe it will not extend the same support to companies backed by overseas investors. According to Lee Hang-koo, executive adviser at Korea Automotive Technology Institute:
“If the government bails out Ssangyong, GM Korea could ask for another round of financial support and Renault Samsung could also make a similar move. It just cannot bail out everyone.”
Under court receivership, Ssangyong will have three months to strike a deal with a potential buyer or negotiate a restructuring plan with creditors.
Ssangyong has recorded operating losses for 15 consecutive quarters, with sales in decline due to a lack of new models since 2015. The South Korean automaker had planned to begin selling a fully electric version of its Korando SUV in Europe. The vehicle was due to be displayed at this year’s Geneva Motor Show, however the event was washed out due to COVID-19 pandemic. From January to November 2020, Ssangyong sold 20% less vehicles than it did in 2019, further worsening the financial woes.
SsangYong Tivoli test unit in Pakistan
In Pakistan, Dewan having acquired Brownfield investment status was in process of introducing a range of vehicles including the Ssangyong Tivoli. In March 2018, Ssangong management visited Pakistan to finalize plans with Dewan and they also visited their assembly plant in Sujawal, Sindh. However Dewan reportedly stopped working on the Ssangyong project due to volatile economic situation of the country. Earlier Renault had also announced to roll back its investment whereas later Ghandhara indicated to shelve the Datsun project due to economic uncertainties.
However Renault, Datsun and Ssangyong were all battling with financial troubles and it’s now quite easy to understand that the cap on these projects was not just due to the economic situation of Pakistan as ranted, but rather their own financial miseries.