Risk of Sale Collapse and Asset Disposal... Crisis at Ssangyong and Renault Samsung Motors

Ssangyong, Standoff in 4-Party Consultations
Renault Samsung, Concerns Over Restructuring Signal with Ilsan TS Sale

[Asia Economy Reporter Ki-min Lee] The sense of crisis is growing among mid-sized automakers such as SsangYong Motor and Renault Samsung Motors. SsangYong Motor's sale negotiations among the last lifelines?KDB Industrial Bank, Mahindra, and HAAH Automobiles?are on the verge of collapse, while Renault Samsung has begun full-scale restructuring by accepting voluntary retirement applications from all employees for the first time in eight years and selling some business sites.

SsangYong’s Sale Negotiations in Limbo... Dual Hardship of Liquidity Cliff

[Image source=Yonhap News]

According to the industry on the 26th, the four-party negotiation body for the sale of SsangYong Motor (SsangYong Motor, Mahindra, HAAH, and KDB Industrial Bank) is showing signs of collapse as each party has differing conditions for the sale. Originally, Mahindra (which holds 74.7% of SsangYong Motor shares) intended to completely withdraw from SsangYong through this sale, whereas HAAH wanted Mahindra to maintain about 30% of the shares until management stabilizes after acquisition.

The differences between the two sides remain at an impasse. With reports that HAAH’s negotiation team recently withdrew to the United States and that Mahindra also decided to step away from the negotiations, the talks have fallen into a maze beyond mere difficulties.

Meanwhile, SsangYong Motor is facing a 'liquidity cliff' imminently. To pay for parts immediately, SsangYong has decided to defer 50% of employees’ salaries for January and February. On the 29th, promissory notes worth 180 billion to 200 billion KRW issued to parts suppliers in November last year will mature.

Renault Samsung, from Voluntary Retirement to Asset Sales

Renault Samsung, which has started accepting voluntary retirement applications from all employees for the first time in eight years through its 'Survival Plan,' is also engulfed in anxiety. Recently, Renault Samsung sold the Ilsan Technostation (TS), a maintenance facility located in Goyang, Gyeonggi Province. Ilsan TS has been targeted for restructuring by Renault Samsung since last year.

According to Renault Samsung, the number of workers at the small maintenance facility Ilsan TS is about eight, not many. However, the sale of Ilsan TS could signal the start of restructuring, which the Renault Samsung Labor Union has strongly opposed. In addition, Renault Samsung is reportedly reviewing efficiency improvement measures for other directly operated centers. Renault Samsung insists that cost reduction and securing competitiveness for new car allocation are indispensable. It has already reduced executives by 40% and cut the remaining executives’ salaries by 20%. In March last year, production of the Nissan Rogue model was halted, and last year’s production volume dropped 31.5% from the previous year to 112,171 units, marking the lowest in 16 years. A Renault Samsung official said, "Improving productivity and reducing costs are inevitable to secure new car allocations," adding, "This year will be a turning point, and the next three years will be critical."