By Kim Tong-hyung
Staff Reporter

The Chinese owners of Ssangyong Motor will decide on a restructuring plan for the company next week, billed as a credibility test of their commitment to the troubled Korean carmaker.

Ssangyong, which relies on sports utility vehicles (SUVs) and luxury sedans to generate most of its sales, is on the verge of collapse, with its losses in 2008 estimated at approximately 120 billion won ($94 million).

The Shanghai Automotive Industry Corp. (SAIC), Ssangyong's parent company, is reluctant to spend money to rescue a company that has seen its competitiveness decline sharply in recent years and has been seeking help from Korea.

However, the Korea Development Bank (KDB), Ssangyong's main creditor, is maintaining that it won't provide financial assistance to the Korean company without the Chinese parent doing so first.

Ssangyong has ceased production since Dec. 17 and the company's union, which has repeatedly demanded that management step down, will hold a vote from Jan. 5 to 6 to decide whether to stage a strike.

Developments next week should determine Ssangyong's fate, and industry watchers are discussing the possibility of liquidation as SAIC won't oppose benefiting from the mess.

Aside from spending 590.9 billion won (about $464 million) to acquire Ssangyong in 2004, SAIC has refrained from making significant investments into the Korean company, despite apparently gaining core technologies for making SUVs and diesel hybrid cars. Obviously, the Chinese owners will have little to lose should they decide to sever ties now.

Ssangyong chief executive Zhang Haitao, currently in China to discuss the restructuring plan with SAIC's top management, is expected to return to Korea Monday with the final word.

"SAIC's greatest concern is that the Ssangyong's condition might not be reversible, even if it spends a massive amount to save the company," said Suh Sung-moon, an analyst at Korea Investment and Securities.

"Ssangyong has no chance for survival unless the market for SUVs rebounds quickly, which seems very unlikely at the moment," he said.

Ssangyong's fall would certainly be one of the biggest industrial casualties the economy has seen in years and put further strain on the local auto industry, which has been reeling from collapsed global demand amid the economic turmoil.

According to KDB, Ssanyong needs an additional investment of at least 600 billion won to survive through the New Year.

However, the bank is refusing to offer help unless SAIC provides the 320 billion won Ssangyong is entitled to, comprising 200 billion won from credit line agreements with the Bank of China and the Industrial and Commercial Bank of China and 120 billion won in technology transfer fees SAIC owes the company.

KDB is likely to put Ssangyong under a debt-rescheduling program should SAIC refuse to open its purse first.

SAIC is reportedly seeking to cut nearly half of Ssangyong's 5,000 production employees, but the union is refusing to accept a trimmed workforce as owners failed to deliver on their investment plans.

"SAIC had promised to invest 1.2 trillion won in Ssangyong and expand the production lineup by 300,000vehicles, but none of those promises were kept," said Han Sang-kyun, Ssangyong's union leader, in a news conference earlier this week.

With Ssangyong and GM Daewoo having cut production recently, nearly 300 equipment makers at Incheon's Namdong Industrial Complex have been forced to temporarily close shop, sending about 5,000 workers home.

thkim@koreatimes.co.kr