US HAAH Automotive to File for Bankruptcy... Ssangyong Motor Sale in Limbo

[Asia Economy Reporter Ki-min Lee] Reports have emerged that HAAH Automotive, a U.S. car distribution company considered a leading candidate to acquire SsangYong Motor, is expected to file for bankruptcy soon.

According to U.S. automotive media Automotive News on the 20th, HAAH Automotive plans to file for bankruptcy soon due to burdens from auto tariffs amid worsening U.S.-China relations and difficulties in securing funding.

HAAH Automotive, based in Irvine, California, is a car distributor that intended to import Chinese automaker Chery Automobile's sport utility vehicles (SUVs) in semi-assembled form and sell them under the brands Vantas and Tiggo.

However, the U.S. tariff rate on Chinese cars, which was 2.5% when HAAH was established in 2014, rose to 25% after the deterioration of U.S.-China relations during the Trump administration. The situation worsened further due to the COVID-19 pandemic. It has been reported that HAAH's management situation has deteriorated recently, with executives responsible for U.S. sales strategies resigning.

Duke Hale, the founder and CEO, explained the background of the bankruptcy filing plan, stating, "There is no clear path forward for Vantas and Tiggo right now," and "Neither the cars nor the parts will be profitable."

With the disappearance of HAAH's possibility to participate in SsangYong Motor's merger and acquisition (M&A) as a major investor, there are forecasts that the pre-approval M&A plan will not proceed smoothly. Questions have been raised about other potential acquirers' ability to mobilize funds.

So far, domestic electric bus manufacturer Edison Motors, electric vehicle company K-pop Motors, and private equity affiliate Park Seok-jeon & Company have publicly expressed their intention to acquire SsangYong Motor. Currently, Edison Motors is known to be the only party that has submitted a letter of intent.

Including public interest bonds and subsequent investment costs, the actual funds required to acquire SsangYong Motor are estimated to be between 800 billion and 1 trillion KRW. Additionally, according to a report by EY Han Young Accounting Corporation, SsangYong Motor's liquidation value was assessed at 982 billion KRW, approximately 362 billion KRW higher than its going concern value of 620 billion KRW.

SsangYong Motor is implementing unpaid leave for employees to reduce fixed costs and secure liquidity, and is pushing for the sale and relocation of its Pyeongtaek plant. It is also speculated that Pyeongtaek City will consider changing the land use of the Pyeongtaek plant site for residential and apartment construction. If the land use of the Pyeongtaek plant site is changed, it is expected that the site could be sold at a price higher than the 900 billion KRW recently appraised during asset revaluation.