[Car Talk Forest] Ssangyong Motor Struggling in Crisis, Can It Secure Government Support?

[Asia Economy Reporter Kiho Sung] "If the government supports Ssangyong Motor, won't that money go to the strong labor union?" "Why should we help Ssangyong Motor that only expects government money?"

These are comments often seen in recent articles related to Ssangyong Motor. Due to the impact of the novel coronavirus disease (COVID-19), Ssangyong Motor, which has even lost support from its parent company, has recently been pleading for the Industrial Stabilization Fund (ISF) to survive. However, public opinion toward Ssangyong Motor is not favorable. The ISF was created to support companies temporarily facing liquidity difficulties due to COVID-19, but supporting Ssangyong Motor, which has posted operating losses for 13 consecutive quarters from 2017 through the first quarter of this year, is considered inconsistent with this purpose.

There is another issue: the attitude of the major shareholder, India's Mahindra. Pawan Goenka, President of the Mahindra Group, visited Korea last January and requested support from the Korea Development Bank and the government, promising to invest 230 billion KRW as a plan to normalize Ssangyong Motor's management. However, this ended as false hope. Due to the unexpected variable of COVID-19, only a one-time operating fund of 40 billion KRW was provided. In the automotive industry, there is a view that Mahindra is pressuring the Korean government, which rejected their support request earlier this year, by using employees as collateral. Ssangyong Motor employs about 5,000 people. Including the sales network and partner companies, tens of thousands of jobs are at stake. This is why criticism arises that the major shareholder withdrew expecting the government to support Ssangyong Motor.

However, there is one issue to consider here: "Is Ssangyong Motor really just sitting back and only looking to the government?" Last year, Ssangyong Motor's labor and management agreed to suspend many welfare benefits such as tuition support and to return December bonuses and production incentives, saving 100 billion KRW in costs. This year, they also achieved wage freeze negotiations first among the top five domestic manufacturers. Additionally, last month, they sold the Busan logistics center and secured 26.3 billion KRW. On the 1st, they announced raising 180 billion KRW by selling land in Guro-dong, Seoul. Unlike the major shareholder Mahindra, Ssangyong Motor's employees and executives are selling everything they can and tightening their belts to survive.

Support for the feared strong labor union is also worth examining. The image of the Ssangyong Motor union is tied to the 2009 "lock-in strike." However, Ssangyong Motor withdrew from the Korean Confederation of Trade Unions (KCTU) immediately after the lock-in strike ended that same year. The "strong Ssangyong union" we remember is from the KCTU era. The Ssangyong Motor union, having chosen an independent path, has maintained 11 consecutive years of no-strike agreements since its establishment.

At this point, it is highly likely that Ssangyong Motor will request the ISF, asking for consideration that it is pursuing a strong self-help plan and striving for employment stability independently of the major shareholder. If Ssangyong Motor collapses as it is, it will be a greater ordeal for employees than the 2009 lock-in strike. Although there are criticisms that supporting a company whose major shareholder has effectively withdrawn violates the basic principles of public fund investment, the government and creditors cannot hastily give a "no support" answer for this reason.

If the Ssangyong Motor issue was resolved politically during the 2009 court receivership, now it is time to carefully seek solutions by considering the automotive industry's inherent competitiveness and future. We hope the government and creditors will wisely find a solution to the recurring crisis of Ssangyong Motor after 11 years.