Ssangyong Motor needs SAIC aid to avoid liquidation

Ssangyong Motor Co may face liquidation if its Chinese parent SAIC Motor Corp fails to provide 320 billion won ($249 million) in new financing to the Korean automaker, its largest creditor said.

Korea Development Bank may take steps toward liquidation rather than debt-restructuring if SAIC pulls out, said a bank official, who declined to be identified because no decision has been reached on the issue.

SAIC has to provide the funds, including a credit line from a Chinese bank, as soon as possible as the Korean sport-utility vehicle-maker will need 600 billion won of new financing next year, the official said. Ssangyong needs money after vehicle sales plunged 27 per cent in the first 11 months of the year.

The automaker owes about 240 billion won to Korea Development, according to the bank. SAIC, a partner of General Motors Corp and Volkswagen AG in China, holds 51 per cent of Ssangyong.

The Korean automaker will discuss a capital injection from SAIC, China's biggest carmaker, once a restructuring plan is agreed to by workers, said Ssangyong's planning division director Choi Sang Jin. The union has threatened strikes in opposition to job cuts, according to its website.

Ssangyong and the union have agreed to seek compromises in a bid to boost the automaker's competitiveness, while trying to get financial support from SAIC, according to a joint e-mailed statement on Monday from the carmaker, union, Won Yoo Chul, a lawmaker belong to South Korea's ruling Grand National Party, and the mayor of Pyeongtaek, Ssangyong's home city.

The four also urged the South Korean government to provide aid. The statement was issued after a meeting between labor and management, convened by Won. The Ministry of Knowledge Economy said on December 26 that the government isn't planning direct financial support for the carmaker.

SAIC may pull out of Ssangyong if the union doesn't accept a restructuring plan, a South Korean lawmaker said on December 23 after meeting Ssangyong's Chief Executive Officer Choi Hyung Tak.

The automaker is in talks with workers about lowering labor costs, Shanghai-based SAIC Motor said in an e-mailed statement on Monday. The Chinese company has asked Ssangyong to cut 2,000 factory workers as a condition for providing $200 million in support, JoongAng Ilbo said on Monday, citing a former Ssangyong executive it didn't name.