(4th LD) Troubled Ssangyong Motor files for court protection

(ATTN: ADDS Ssangyong Motor CEO's resignation in para 7)
SEOUL, Jan. 9 (Yonhap) -- Ailing automaker Ssangyong Motor Co. filed for court
protection from creditors due to a worsening cash crisis on Friday, becoming
South Korea's first high-profile victim of the global economic slump.
Ssangyong, which is owned by China's Shanghai Automotive Industry Corp. (SAIC),
ran into deep financial trouble in mid-2008 as vehicle sales tumbled amid
weakening demand and a liquidity crunch.
The smallest carmaker in South Korea said it filed for receivership with a Seoul
court after a board meeting in China to protect itself from creditors and
normalize its operations.
No plan for layoffs or financial support from SAIC was announced, but Ssangyong
said it will cut costs through voluntary retirement and paid leave.
Asked whether SAIC would move to exit from the ailing carmaker, Chung Mu-young, a
Ssangyong spokesman, replied, "Shanghai Automotive will continue to take
responsibility as the main shareholder."
"But the fate of Ssangyong is now in the hands of the court," Chung added.
Ssangyong Motor Chief Executive Officer Choi Hyung-tak resigned from the post on
the same day, Chung said, declining to give the reason for his departure.
Some local analysts say SAIC might have decided to let Ssangyong apply for court
receivership to avoid the financial burden of a rescue plan.
SAIC, which holds a 51-percent stake in Ssangyong, will lose its management
control if the South Korean court accepts receivership.
The Ssangyong stake held by SAIC was valued at about 60 billion won (US$45.2
million) at the current market price. By comparison, Ssangyong owed a total of
600 billion won to creditors and 150 billion worth of convertible bonds maturing
in April, according to one analyst.
"I think the court receivership may be a step for SAIC to withdraw from Ssangyong
Motor," said the analyst, asking not to be named.
Shares of Ssangyong, which plunged more than 80 percent last year, were suspended
due to the news of it seeking court receivership.
Unionized workers at Ssangyong strongly accused the Chinese parent of "betraying"
them, saying SAIC has done little to fund the automaker and is only interested in
acquiring its technology.
"We won't wait idly for Shanghai capital to steal our technology," said an union
official, referring to SAIC.
Ssangyong's 5,200-strong labor union said it has zero-tolerance for restructuring
plans and threatened to strike if SAIC demands job cuts.
SAIC had been under pressure from South Korea's state-run Korea Development Bank
(KDB), the main creditor of Ssangyong, to provide fresh capital to the troubled
affiliate.
A KDB official said the lender would consider providing financial support to
Ssangyong, depending on the possibility of a turnaround.
"KDB will decide whether to give financial assistance to Ssangyong Motor by
comprehensively reviewing the court's decision and plan for normalization," the
bank official said.
Last year, vehicle sales at Ssangyong, which has an annual production capacity of
200,000 units, dropped 29.6 percent from a year earlier to 92,665 units.
SAIC bought a 51 percent stake in Ssangyong for $500 million in 2004, marking the
first direct investment by a Chinese company in a local manufacturer.
The acquisition has often been marred by conflicts with the union, which has
accused SAIC of stealing Ssangyong's car-manufacturing technology and failing to
honor its investment pledge.
Ssangyong reported a net loss of 98 billion won in the January-September period
last year, hit by slumping sales. Ssangyong is burning through 25 billion won in
cash every month, analysts say.
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