Ssangyong Motor at a Crossroads, 'Unpaid Leave' Self-Rescue Plan Vote Ends Today

[Image source=Yonhap News]

[Asia Economy Reporter Ki-min Lee] The labor union vote on the self-rescue plan of Ssangyong Motor, which is undergoing corporate rehabilitation procedures, will end on the 8th. The outcome of the vote is expected to determine the direction of Ssangyong Motor's rehabilitation process.

According to Ssangyong Motor and industry sources, the Ssangyong Motor labor union plans to complete the vote on the 'Special Labor-Management Agreement for Business Normalization' and announce the results on the same day. The Ssangyong Motor union conducted voting from 3:40 PM to 5:40 PM (afternoon shift) the previous day and resumed voting from 7 AM for the morning shift on the day of the announcement.

Earlier this month, Ssangyong Motor management met with Jeong Il-gwon, chairman of the Ssangyong Motor labor union, and other union members to seek agreement on the company's self-rescue plan. Chairman Jeong also held explanatory sessions for union members until recently. The Ssangyong Motor self-rescue plan centers on 50% of technical staff and 30% of office workers taking unpaid leave for two years. Employees will first undergo one year of unpaid leave, with the possibility of extending the unpaid leave for an additional year depending on vehicle sales performance.

The management also proposed extending the wage cuts and suspension of welfare benefits agreed upon in 2019 until June 2023. Executive salaries will be further cut by 20%, totaling a 40% reduction. Additionally, it was agreed that no strikes will be conducted until business normalization is achieved, and the collective bargaining cycle will be extended from the current two years to three years. If the union members vote in favor by a majority, Ssangyong Motor will establish methods for selecting employees subject to unpaid leave.

If Ssangyong Motor's self-rescue plan is realized, it will also ease the urgent task of preparing the rehabilitation plan to be submitted to the court. Ssangyong Motor must submit the rehabilitation plan, based on the investigation report and self-rescue plan prepared by the investigator Han Young Accounting Corporation, to the Seoul Rehabilitation Court. Ssangyong Motor expects that including the self-rescue plan in the rehabilitation plan will result in a valuation of going concern value higher than the liquidation value.

Furthermore, with fixed costs reduced, funds can be concentrated on new vehicle development. Ssangyong Motor is currently preparing to produce its first electric vehicle, the E100 (project name), and a new mid-size sport utility vehicle (SUV), the J100 (project name). Originally, the E100 was scheduled for release in the second quarter of this year but was postponed due to financial difficulties. Especially, unlike the factory occupation protest incident 12 years ago in 2009, the current situation presents a completely different image, giving the government a rationale to support Ssangyong Motor. The Korea Development Bank, Ssangyong Motor's main creditor bank, insists on seeing self-rescue efforts as a prerequisite for support.

In the case of opposition, the company would have to revise the self-rescue plan and submit it again for union member voting, inevitably delaying the rehabilitation process and sale schedule, and reducing the likelihood of successful rehabilitation. Since the union is insisting on maintaining total employment and even rejecting the last resort of unpaid leave, the company has limited rehabilitation options. Moreover, this could also act as a deterrent to potential buyers interested in acquiring Ssangyong Motor. Ssangyong Motor's rehabilitation claims amounted to about 370 billion KRW, including unpaid wages, but with the initiation of rehabilitation procedures, the entire employee retirement allowance of about 300 billion KRW was also tied up as public claims.

For this reason, Chairman Jeong appealed to union members the previous day, saying, "I fully understand that union members are angry about being blamed for management failure, but now we must make rational judgments and overcome the crisis," and "We must show our will to survive externally to change the negative perception of Ssangyong Motor and justify the necessity of support."