Wage Delays Amid Voluntary Retirement... Cold Winds Blow in the Auto Manufacturing Industry from the New Year

Renault Samsung Opens Voluntary Retirement for All Employees After 8 Years
Ssangyong Motor Informs Union of "50% Wage Payment for January-February"

[Image source=Yonhap News]

[Asia Economy Reporter Yu Je-hoon] From the beginning of the new year, foreign-affiliated mid-sized automakers have been hit by a series of restructuring and wage delays, facing a cold wind.

According to the industry on the 24th, Renault Samsung recently launched a "Survival Plan" centered on offering voluntary retirement to all employees except those hired after March 2019. This is the first time in about eight years since 2012 that Renault Samsung has expanded voluntary retirement to all employees.

Renault Samsung has entered this emergency management system due to rapidly deteriorating performance. Although Renault Samsung released six new models last year, it failed to achieve any significant turnaround in results. On the contrary, production volume sharply decreased due to the end of Nissan Rogue contract manufacturing and the impact of the novel coronavirus disease (COVID-19).

According to the Korea Automobile Manufacturers Association (KAMA), Renault Samsung produced 114,630 units last year, a 30.5% decrease compared to the previous year. This is the lowest figure in 17 years since 2003.

Dominique Signora, CEO of Renault Samsung, explained the background of this restructuring, saying, "Supply exceeds demand in all markets, so we must endure sacrifices and adapt to the new reality. We need to take proactive steps now while we have the capacity to reach the break-even point. We must escape the current situation where cash is rapidly being consumed."

The situation is also unfavorable for SsangYong Motor, which is undergoing corporate rehabilitation procedures and sale discussions. SsangYong recently informed the labor union that it would pay only 50% of wages for January and February due to worsening financial difficulties. After the rehabilitation application, some parts suppliers refused to deliver and demanded daily cash payments as a condition for parts supply, which significantly worsened liquidity.

SsangYong Motor filed for corporate rehabilitation with the court on December 21 last year due to liquidity crisis. As the situation worsened, production also dropped to 106,836 units, marking the lowest level in 10 years.

The last lifeline for SsangYong Motor is the sale negotiations. If negotiations conclude this month, and HAAH Automotive makes capital payments and KDB Industrial Bank provides additional financial support, the company can return to a normal track.

However, the sale negotiations have yet to show significant progress. KDB Industrial Bank, Mahindra, and HAAH Automotive are negotiating over share sales, but due to disagreements over the scale of capital reduction, acquisition price, and post-sale debt payment guarantees, they have failed to reach a conclusion by the final negotiation deadline.