Struggling South Korean car maker SsangYong says it is “business as usual” and will continue to sell and service cars in Australia – despite filing for bankruptcy just days prior to Christmas 2020.
SsangYong has been in financial pain for years and Indian conglomerate Mahindra and Mahindra had been trying to sell its majority shareholding in the company over the past six months.
Mahindra bought a 70 per cent stake in SsangYong in 2011 for US$463.6 million – also saving it from bankruptcy at that time – and had increased its shareholding to 75 per cent by 2019.
However, over a decade of Mahindra ownership, SsangYong sales never really took off and the company couldn’t reach a production volume that was financially competitive or viable.
There were glimpses of hope when SsangYong posted its first profit in nine years, in 2016, a year after launching the Tivoli small SUV (pictured below).
The following year, in 2017, SsangYong produced more than 131,000 cars – the highest output in 14 years, or since 2003.
However, most car factories need to produce at least 200,000 cars per year to remain viable.
After Mahindra was unable to offload its shareholding, SsangYong filed for bankruptcy on 21 December 2020, owing 315.3 billion won (US$285 million) in overdue debt to several financial institutions, a week after their deadline for payment had passed.
The Reuters news agency reported that, among the financial institutions owed money, about 30 billion won was owed to Bank of America, 20 billion won to JPMorgan Chase & Co, and 10 billion won to BNP Paribas.
“SsangYong Motor applied for the court receivership procedure as a massive disruption in the operation is expected after the company could not reach an agreement to extend its loan repayment deadlines with foreign banks,” the company said in a media statement.
While sales of SsangYong had fallen by 20 per cent globally so far this year, the brand had enjoyed a resurgence in Australia, with deliveries of new vehicles up by 80 per cent in the first 11 months of 2020 versus the same period last year.
Although the sharp increase is from a low base, the SsangYong Musso ute (pictured below) doubled in sales over the same period and represented more than half of all SsangYongs sold locally.
SsangYong Australia said the company has three months to secure a new financial backer.
SsangYong Australia managing director Chris Mandile said in a media statement: “SsangYong Motor Company Korea has entered a private rehabilitation program which will run for three months. This program will allow SsangYong to restructure the business as it works with creditors to try and complete the sale process which has been ongoing for some time.”
Should a new financial backer not be found, SsangYong would then “enter voluntary administration allowing for a forced restructure of the organisation”.
“It is the intention of the company to use the three-month period of rehabilitation to avoid this,” the statement continued.
During this three-month period “SsangYong Motor company – including the Australian subsidiary – remains fully operational, business as usual”.
SsangYong has not flagged which – if any – investors are interested in bailing out the company again.
However it says the plan is to “accelerate its efforts towards securing a deal with the interested new investor” and described this as “another step in the transformation and rebirth of SsangYong into a competitive company”.
SsangYong Australia added: “It is important to note that the South Korean administration process is similar to the American Chapter 11 administration process, which is used to assist a business restructure often prior to a sale.”
“SsangYong and the South Korean Government (are) committed in making every effort to secure a viable future for everyone involved with this proud company,” the SsangYong Australia statement said.
The Reuters news agency reported South Korea’s trade ministry issued the following statement: “Regardless of SsangYong’s filing for court receivership, negotiations of SsangYong sale deal is still ongoing”.
The bankruptcy filing comes as SsangYong had been expanding its local dealer network since returning to Australia in 2018, appointing its 50th showroom nationally in November 2020, after appointing six new dealers in the three months prior.
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