Industry and Academia Warn "Without Realistic Government Support, Risk of Mass Bankruptcies Among Partner Companies"
[Asia Economy Reporter Ki-min Lee] As SsangYong Motor enters corporate rehabilitation proceedings (court receivership), the cooperative association of partner companies will also transition into a commercial creditor group. They plan to cooperate to ensure SsangYong Motor successfully completes the court receivership.
However, concerns have been raised that partner companies may face bankruptcy due to financial difficulties while SsangYong Motor is under court receivership, highlighting the need for practical government support.
According to officials from the SsangYong Motor Cooperative Association on the 14th, the cooperative association plans to form a commercial creditor group in line with the commencement of SsangYong Motor’s rehabilitation proceedings. On the 12th, the cooperative held a meeting of executives, disbanded the emergency response committee that had been maintained, and discussed the formation of the creditor group following the start of the court receivership.
Currently, about 350 companies hold commercial claims including SsangYong Motor’s public claims, rehabilitation claims, and rehabilitation secured claims. The total amount of claims is reported to reach 500 billion KRW. If the court decides on SsangYong Motor’s bankruptcy, a significant number of partner companies are expected to collapse together, leading to large-scale job losses.
Accordingly, after transitioning to the commercial creditor group, the partner companies have set a policy to coordinate with the court and among themselves to prevent SsangYong Motor’s bankruptcy and to help it graduate from court receivership.
The cooperative association formed an emergency response committee last December when SsangYong Motor applied for corporate rehabilitation and autonomous restructuring (ARS), and has been supporting the normalization of SsangYong Motor. Even when some partner companies refused to supply parts causing SsangYong Motor’s factories to halt, the emergency response committee actively persuaded the partners.
Recently, they also submitted a petition to the court expressing their intention to actively participate in the court’s decision on the premise of SsangYong Motor’s survival and requested assistance to keep the factories running.
Even if SsangYong Motor successfully completes court receivership, small and medium-sized partner companies that mainly supply parts to SsangYong Motor are expected to remain in crisis.
This is because small and medium-sized partner companies have already fallen into long-term financial difficulties due to SsangYong Motor’s deferred payment of promissory notes. Although the government announced in January that it would help partner companies using policy finance programs, most small and medium-sized partners have credit issues and are unable to apply.
A partner company official said, "The number of SsangYong Motor partner companies quietly closing without receiving support from policy finance programs is increasing," and added, "The government should lower the eligibility criteria for financial support programs to provide practical help."
Professor Ho-geun Lee of Daeduk College’s Department of Automotive Engineering also pointed out, "Even if the court saves SsangYong Motor, if parts suppliers go bankrupt, it will take several months and enormous funds to normalize vehicle production, so government support is necessary."
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