SsangYong Motor said its parts delivery deadlock is showing signs of alleviating as one of the key partners resumed supply. AFP
South Korea’s SsangYong Motor, which recently filed for court receivership due to a liquidity crunch, on December 24 said its parts delivery deadlock is showing signs of alleviating as one of the key partners resumed supply.
A company official said: “Hyundai Mobis has announced that it will start supplying head lamps again, starting on December 29.”
The cash-strapped automaker had announced on December 23 that it will suspend the operation of its Pyeongtaek factory on December 24 and 28 after its suppliers refused to deliver parts.
The Pyeongtaek plant accounts for 86.54 per cent or 3.1 trillion won ($2.8 billion) of the company’s yearly sales.
It said in a regulatory filing: “Due to the disruption in auto parts delivery, it was inevitable that production should be partly suspended.”
The suppliers’ strike came in the wake of the carmaker’s apparent lack of payment capacities, as the carmaker failed to pay 60 billion won worth of debts to its foreign creditor banks and 90 billion won to the state-run Korea Development Bank.
On December 22, the day after the company filed for court receivership, the Ministry of Trade, Industry and Energy summoned key suppliers in a meeting, urging them to cooperate. Trading of SsangYong Motor shares has been suspended since December 21.
The list of anxious suppliers included Hyundai Mobis, LG Hausys, S&T Dynamics, BorgWarner Ochang and Continental Automotive.
LG Hausys said it will hold further negotiations to decide on whether to resume supply, but others continued the boycott, asking for advance cash payment.
The carmaker acknowledged that the suppliers’ mass boycott may reflect the general fear in the industry that dates back to the 2009 financial crisis, when the automaker had filed for court receivership. It was Indian investor Mahindra which stepped forward to acquire the troubled company in the following year.
A SsangYong Motor official said: “[But] the success of the Autonomous Restructuring Support [ARS] depends on [the company’s] normal production and sale activities.”
ARS refers to a programme which holds the receivership process by a maximum of three months to allow the filing company more time for negotiations with creditors and investors.
The company’s labour union, while consenting to the need of such procedure for business recovery, underlined employment stability
The union said in a release: “The ARS was a realistic and systematic scenario as no potential new buyer has so far come into view.
“But should [the company] carry out mass layoffs, [the union] shall hold the line and resist to the end.”
Meanwhile, the South Korean automaker is slated to roll out the first domestic electric compact sport utility vehicle model within the first half of next year.
The incoming SUV, currently referred to as its project name E100, is expected to take the shape of the company’s steady selling line Korando.
THE KOREA HERALD/ASIA NEWS NETWORK
