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SsangYong Motor, a South Korean automaker owned by India’s Mahindra & Mahindra, was put under court receivership on April 15 as the company could not find a new investor. Photo courtesy of SsangYong Motor

Korean automaker faces existential crisis in a decade

SsangYong Motor, a South Korean automaker owned by India’s Mahindra & Mahindra, was put under court receivership on April 15 because the cash-strapped firm has failed to find a new investor.

The Seoul Bankruptcy Court green-lighted the debt-rescheduling process for SsangYong as its potential buyer, HAAH Automotive Holdings of the United States, hesitates to purchase it.

Mahindra has talked with HAAH to sell its majority stake in SsangYong, but HAAH did not submit a letter of intent to buy the SUV maker before March 31 deadline.

SsangYong also went through court receivership a decade ago. The procedure is designed to help troubled firms avoid bankruptcy.

SsangYong filed for court receivership last December when it could not roll over its loans. Back then, the court gave a three-month grace period for negotiations with HAAH.

But HAAH did not step up to acquire SsangYong. As a result, the latter’s CEO Yea Byung-tae resigned last week to take responsibility.

SsangYong will have to submit its plan to normalize its business, and the Seoul court will decide whether or how to revive the debt-laden corporation.

SsangYong’s 2021 operating loss amounted to about $400 million, up almost 60 percent from a year ago, while its sales dipped 18.6 percent year-on-year.

“The discussion with the most prominent candidate has been delayed. But there are also other entities ready to buy SsangYong,” a SsangYong official said.

“We aim to finish the M&A procedure early on so that the court does not have to review the recovery plan.”

New candidates?

Korean electric vehicle company K-pop Motors recently announced its interest in gobbling up SsangYong. The country’s Edison Motors, which produces electric buses, followed suit.

“I don’t think Edison Motors or K-pop Motors will eventually take over SsangYong,” Prof. Kim Pil-soo at Daelim University said. “The only plausible way would be to streamline SsangYong and tame its trade union so that HAAH will become more interested in the firm.”

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