ID :
37799
Mon, 12/29/2008 - 10:32
Auther :
Shortlink :
http://m.oananews.org//node/37799
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(EDITORIAL from the Korea Herald on Dec. 29) - Self-help first
The ailing Ssangyong Motor and its majority shareholder Shanghai Automotive
Industry Corp. should seek self-help measures first before asking for government
help in resolving a potential liquidity crisis.
During a meeting between SAIC Vice Chairman Jiang Zhiwei and Knowledge Economy
Vice Minister Lim Chae-min last Friday, SAIC made a request for government
assistance to ensure Korea Development Bank, Ssangyong Motor's main creditor,
offers new loans to the motor company. The government, in turn, said that SAIC
and Ssangyong Motor's labor union must agree on self-rescue efforts before it
will take any action.
Korea Development Bank said Shanghai Automotive must provide help first before it
will consider providing new loans. The bank also said SAIC should extend 320
billion won ($246 million) in emergency funding before the bank will consider
providing new loans. That amount includes the 120 billion won the Chinese parent
company should already have paid Ssangyong Motor for technology transfer.
The bank also said SAIC also needs to offer repayment guarantees worth 200
billion won for Ssangyong Motors to take up loans promised by two Chinese banks.
Shanghai Automotive Industry Corp. acquired a 51-percent stake in Ssangyong
Motors for 590 billion won in 2004. As part of the deal, Shanghai Automotive
Industry Corp. was to invest 300 billion won annually, including technology
transfer fees, through 2009. So far, SAIC has not paid 120 billion won in
technology transfer fees.
Ssangyong Motors, the country's smallest carmaker, with an annual production
capacity of 200,000 vehicles and 7,100 employees, has seen its sales decline over
the years. In the third quarter of this year, the company lost 28.2 billion won,
making its fourth consecutive quarterly loss. The company is expected to post a
net loss of more than 100 billion won this year due to a slump in demand. While
the company sold 3,835 cars last month, it needs to sell at least 10,000 cars to
stay afloat, according to the company.
The company stopped production lines for two weeks this month and said it would
be unable to pay its workers this month. There is speculation that the company
may go bankrupt in January if no new cash injections are made.
Meanwhile, Ssangyong Motor's chief executive is reported to have said that SAIC
could walk away from the company if the labor union does not accept its
restructuring proposal. Ssangyong Motor's labor union is demanding that the
management step down.
Facing an uphill battle for survival, SAIC, Ssangyong Motor and the labor union
should come together and arrive at a compromise that will result in a win-win
situation for all sides concerned. The government and KDB are right in refusing
new loans unless the companies institute self-rescue measures. To do so would
invite moral hazard. Furthermore, World Trade Organization rules ban government
interference in specific industries or companies.
(END)
Industry Corp. should seek self-help measures first before asking for government
help in resolving a potential liquidity crisis.
During a meeting between SAIC Vice Chairman Jiang Zhiwei and Knowledge Economy
Vice Minister Lim Chae-min last Friday, SAIC made a request for government
assistance to ensure Korea Development Bank, Ssangyong Motor's main creditor,
offers new loans to the motor company. The government, in turn, said that SAIC
and Ssangyong Motor's labor union must agree on self-rescue efforts before it
will take any action.
Korea Development Bank said Shanghai Automotive must provide help first before it
will consider providing new loans. The bank also said SAIC should extend 320
billion won ($246 million) in emergency funding before the bank will consider
providing new loans. That amount includes the 120 billion won the Chinese parent
company should already have paid Ssangyong Motor for technology transfer.
The bank also said SAIC also needs to offer repayment guarantees worth 200
billion won for Ssangyong Motors to take up loans promised by two Chinese banks.
Shanghai Automotive Industry Corp. acquired a 51-percent stake in Ssangyong
Motors for 590 billion won in 2004. As part of the deal, Shanghai Automotive
Industry Corp. was to invest 300 billion won annually, including technology
transfer fees, through 2009. So far, SAIC has not paid 120 billion won in
technology transfer fees.
Ssangyong Motors, the country's smallest carmaker, with an annual production
capacity of 200,000 vehicles and 7,100 employees, has seen its sales decline over
the years. In the third quarter of this year, the company lost 28.2 billion won,
making its fourth consecutive quarterly loss. The company is expected to post a
net loss of more than 100 billion won this year due to a slump in demand. While
the company sold 3,835 cars last month, it needs to sell at least 10,000 cars to
stay afloat, according to the company.
The company stopped production lines for two weeks this month and said it would
be unable to pay its workers this month. There is speculation that the company
may go bankrupt in January if no new cash injections are made.
Meanwhile, Ssangyong Motor's chief executive is reported to have said that SAIC
could walk away from the company if the labor union does not accept its
restructuring proposal. Ssangyong Motor's labor union is demanding that the
management step down.
Facing an uphill battle for survival, SAIC, Ssangyong Motor and the labor union
should come together and arrive at a compromise that will result in a win-win
situation for all sides concerned. The government and KDB are right in refusing
new loans unless the companies institute self-rescue measures. To do so would
invite moral hazard. Furthermore, World Trade Organization rules ban government
interference in specific industries or companies.
(END)
