EDITORIAL from the Korea Times on Jan. 12

Save Our SUVs: Seoul, Beijing Should Consider Long-Term Repercussions

Ssangyong Motor's filing for bankruptcy protection Friday, though not entirely
unexpected, is still disappointing in more than a few ways.

Though the smallest of the five domestic carmakers, Ssangyong resembles the U.S.
Big-3 most in that it has specialized in gas-guzzling sports utility vehicles
(SUVs) and large sedans and is suffering most from similar problems ??? plunging
sales and hemorrhaging bottom lines. Based on market principle alone, therefore,
the fate of this unfit and ``not-too-big-to-fail" player appears to be sealed.
But risk can hardly be ignored in letting the local offshoot of China's largest
automaker go down, not just in terms of immediate economic loss but in its
long-term impact on the potential for economic cooperation between the two
countries.
It is quite doubtful ??? and regrettable ??? in this regard that its biggest
shareholder, Shanghai Automotive Industrial Corp. (SAIC), has done all it could
before applying for a court receivership, a step widely regarded as abandoning
its role in rescuing the troubled carmaker from its eventual sell-off to a new
owner or liquidation.
Ssangyong Motor's Chinese management says it had little more to do after its
proposal to inject $200 million in exchange for trimming one third of the
company's 7,500 workers met with union opposition. We do not know whether
Ssangyong's labor costs are too high compared with its competitors or its
corporate performances. Even so, personnel management and union control is also
the management's responsibility and cannot be ascribed to outsiders, including
the government.
When SAIC took over Ssangyong Motor in 2004, it vowed to invest 1.2 trillion won
($902 million) into R&D and developing new models over the following four years
but has yet to keep the pledge. If only it had invested half of the promised
amount, Ssangyong would have few cash-flow problems, industry watchers say. The
ill-fated automaker needed $451 million in new financing to stay in business.
Union officials say SAIC has virtually retrieved all of its initial investment of
$500 million ??? equivalent to the cost of developing just two new models ???
through the illegal transfer of technology and key equipment, criticizing their
large shareholder for another case of ``dine-and-dash."
Other industry experts claim, however, it was fully anticipated after the Chinese
acquisition of the cash-short automaker five years ago.
This offers a good lesson to Corporate Korea, including the government's
policymakers, in dealing with marginalized firms through their sell-off to
foreign corporate buyers, particularly those in the developing countries who want
to emulate ??? or catch up with ??? Korea's success in certain manufacturing
industries, including semiconductor, shipbuilding and petrochemical. An
industrial report said SAIC's acquisition of Ssangyong Motor has narrowed the gap
in auto technology between the two countries from four years to just one.
Currently, the best option left is to restructure the vehicle maker to make it
leaner and more efficient before finding a would-be buyer, a job requiring close
cooperation of all parties involved ??? labor, management and the two governments
??? as SAIC is virtually a state enterprise.
The eventual failure of the company would lead to 17,000 lost jobs, including
those of numerous parts suppliers, and a serious impact on the regional economy.
For China, which is now emerging as a global corporate buyer and manager armed
with deep foreign exchange reserves, this should not serve as a bad reminder of
how selfish and shortsighted a corporate citizen it is.
This is also why Seoul should demand that SAIC fulfills its duty as a responsible
manager, according to the outcome of the prosecution's investigation into the
alleged technological theft case.
(END)