Late last month we reported on SsangYong's woeful financial position, which you may remember included having to defer paying workers' salaries coming into Christmas. In a letter to employees in late December, SsangYong admitted to its difficulties, telling them the company "is expected to post a deficit of more than W100 billion (AUD$114 million) this year alone".
Things are set to get a whole lot worse in the near future it seems. Reports indicate that SsangYong is facing liquidation if operating capital cannot be secured from parent company Shanghai Automotive Industries China (SAIC), who holds a 51 percent controlling interest.
The Korea Development Bank (KDB) is looking for a total of around USD$250 million in direct aid and a guaranteed capital injection from SAIC. If these funds continue to be withheld - there are political issues at work here - then KDB said it will consider refusing SsangYong further finance.
This could ultimately lead to the liquidation and complete shutdown of SsangYong, which produces 200,000 vehicles annually and has over 7000 employees.
It's now a desperate situation with SsangYong having already halted production in the second half of December due to flagging sales. Only 3835 vehicles were sold in November, down 63 percent from the same time last year. Total sales have fallen 27 percent this year as SsangYong continues to amass debt.
SsangYong and SAIC are struggling in negotiations over the new capital needed. Things have been complicated by a demand from SsangYong's labor union that company management step down and a protest outside the Chinese Embassy in Seoul by the union. SAIC is reported to be demanding wage cuts and the axing of at least 2000 production line jobs, putting the Shanghai parent on a collision course with the union.
We'll keep an eye on this story as it unfolds. While some of you may not lament the loss of SsangYong from the automotive industry, spare a thought for its 7000 or so employees. We've got our fingers crossed there's light at the end of the tunnel.