Ssangyong Motor Accelerates 'Production Resumption and Investment Talks' This Weekend

[Image source=Yonhap News]

[Asia Economy Reporter Ki-min Lee] Ssangyong Motor, which lost time as the decision to commence rehabilitation proceedings was extended, is busy moving to resume factory operations while entering final negotiations with the acquisition candidate HAAH Automotive this weekend.

According to the industry on the 27th, Ssangyong Motor plans to resume production on the 2nd of next month and complete the investment contract and P-Plan (pre-rehabilitation plan) procedures by early to mid-next month.

Earlier, on December 21 last year, Ssangyong Motor applied for the commencement of rehabilitation proceedings and ARS at the Seoul Bankruptcy Court, which postponed the decision to commence rehabilitation proceedings until the 28th of this month. So far, negotiations among the four-party consultative body consisting of Ssangyong Motor, its major shareholder Mahindra, HAAH, and the main creditor bank Korea Development Bank have faced difficulties, and adverse factors such as parts suppliers, mainly foreign companies, refusing to deliver have continued, preventing the preparation of the P-Plan.

However, the court recently postponed the decision to commence rehabilitation proceedings considering that Mahindra agreed to reduce shares and bonds, and HAAH clearly intends to acquire Ssangyong Motor. A Ssangyong Motor official said, "We received a reply from the court that it will postpone the decision to commence rehabilitation proceedings as long as consultations among stakeholders such as Ssangyong Motor and HAAH continue," adding, "This means that the time to submit the P-Plan is guaranteed."

The industry expects that although Ssangyong Motor has gained time due to the court's decision, it will become even busier from now on. This is because HAAH's investors have not made an investment decision due to Ssangyong Motor's debt and prolonged production suspension.

First, Ssangyong Motor plans to resume factory operations starting from the 2nd of next month. This month, Ssangyong Motor suspended factory operations five times in total?from the 3rd to 5th, 8th to 10th, 17th to 19th, 22nd to 24th, and 25th to 26th?resulting in only three business days of actual operation. Although about 70 partner companies, including domestic large corporations, foreign companies, and small businesses, had previously announced suspension of deliveries to Ssangyong Motor, most of them agreed to resume deliveries after continuous persuasion by Ssangyong Motor and the partner companies' emergency countermeasures committee. Accordingly, Ssangyong Motor plans to contact the companies that have not yet decided to resume supply over the weekend and start normal production.

The industry believes that if Ssangyong Motor resumes factory operations, investment negotiations could accelerate rapidly. Ssangyong Motor and HAAH have been reviewing their business plans, but it is known that they have been revising these plans due to the suspension of factory operations.

Even after completing investment negotiations, it is expected that Korea Development Bank's support will be necessary for Ssangyong Motor to proceed with the P-Plan. HAAH insists that the creditors must provide corresponding financial support on the condition that it invests $250 million (approximately 280 billion KRW) in Ssangyong Motor. Recently, Prime Minister Chung Sye-kyun and Financial Services Commission Chairman Eun Sung-soo have expressed positive views on supporting Ssangyong Motor, but Korea Development Bank remains reserved. It is reported that Ssangyong Motor has recently been discussing its rehabilitation plan with Korea Development Bank as well.