Ssangyong Motor, 50% Wage Payment Postponed... President Calls It a "Desperate Measure"

Ssangyong Motor [Image source=Yonhap News]

[Asia Economy Reporter Changhwan Lee] Ssangyong Motor has decided to defer payment of 50% of employees' wages for this month and next month due to a liquidity crisis.

According to industry sources on the 25th, Ssangyong Motor President Yebyeongtae said through the company bulletin board, "As part of a desperate measure, following the application for exemption of the individual consumption tax in January, we have no choice but to partially pay salaries for January and February," adding, "I feel heavy-hearted and ashamed that the situation has reached this worst point."

Since Ssangyong Motor filed for corporate rehabilitation last month, some parts suppliers have refused to deliver and demanded cash payment instead of promissory notes as a condition for resuming delivery, resulting in depletion of liquidity funds.

President Yebyeongtae explained, "In the case of small-scale partner companies, we are currently paying material costs in cash," and added, "If non-payment leads these companies to bankruptcy, it will cause a domino effect of parts base collapse, and we ourselves will face disruption in production."

He continued, "One of the reasons for the rapid deterioration of cash flow is that material payments must be made due to unsettled promissory notes maturing last month and partial payments of promissory notes maturing in January and February," he added.

Ssangyong Motor faces promissory notes maturing worth 180 billion to 200 billion won on the 29th. The Ssangyong Motor Cooperative, composed of about 350 small and medium parts suppliers, estimates that unpaid delivery payments since October last year exceed 500 billion won.

Poor sales are also a cause. President Yebyeongtae said, "Even considering the traditional off-season, sales are nearly 2,000 units below the initial plan," and explained, "Some criticize why we did not predict that purchase demand would drop due to the Autonomous Restructuring Support (ARS), but excluding Hyundai Motor and Kia, the other three companies are experiencing similarly poor sales."