Kim Hyun-bin began his journalism career at Arirang TV from 2012 to 2017, specializing in defense, foreign affairs and the economy. In 2018, he joined The Korea Times, covering society and business, and is currently responsible for embassy affairs.
Can Ssangyong Motor recover under KG management?
Ssangyong Motor's Pyeongtaek plant in Gyeonggi Province. / Courtesy of Ssangyong Motor
By Kim Hyun-bin
By Kim Hyun-bin
The new owner of Ssangyong Motor has been confirmed to be KG Group, Korea's 71st-largest conglomerate which also operates the country's biggest online payment service. All eyes are now on whether KG will succeed in normalizing operations at the ailing SUV maker, which was on the verge of bankruptcy.
Many experts believe the key is to improve the automaker's unstable financial structure, establish a conflict-free labor-management relationship, and secure a stable mass production system for the new SUV, Torres, which has seen a surge in orders.
Experts say there are challenges that need to be addressed urgently.
The first is debt. Ssangyong Motor's liabilities, including bonds, amount to 1.5 trillion won. Also, annual operating capital, or the amount of money needed each year to keep the automaker running, is expected to exceed 300 billion won ($232 million).
"There are doubts over KG Group's ability to present a future vision for Ssangyong Motor, because it has no experience in the automobile field. It is also important to form cooperative relationships with its strong union,” an automobile industry official said.
KG Group says it will work with Ssangyong Motor to resolve the issues at hand.
“The employees know better than anyone about their company's situation. There is a lot of know-how and experts there. We need to work with Ssangyong Motor to resolve the issues at hand,” a senior KG group official said.
Now, all eyes are on Torres, a mid-size sports utility vehicle (SUV) whose sales performance so far has raised expectations. Sales surpassed 12,000 models on the first day of pre-orders on June 13. This is the first time in 17 years that the company broke its own sales record following the release of the Actyon SUV in 2005. A total of 3,013 Actyon SUVs were sold on the first day it was released.
Ssangyong Motor's Torres SUV / Courtesy of Ssangyong Motor
"Compared to the previous contract with Edison Motors, (KG Group) will be of practical help to creditors as it can increase the actual repayment rate for the rehabilitation bonds,” SsangYong Motor Manager Jung Yong-won said.
“The number of pre-orders for the new Torres has exceeded 25,000 as of June 27. Based on the success of Torres, we will carry out the development of additional models such as EVs in the future without any setbacks, and speed up the normalization of operations," Jung said.
The Seoul Bankruptcy Court selected the KG consortium as the final candidate to acquire Ssangyong Motor, Tuesday.
“KG consortium was selected as a prospective buyer, while the Gwanglim Consortium (Ssangbangwool Group) was the only one to participate. Gwanglim was evaluated as being more unfavorable than KG Consortium's offer,” the court said.
The meeting of stakeholders to obtain the consent of creditors and shareholders is expected to be held in late August or early September.
KG Group Chairman Kwak Jae-sun is well known for his successful investments within the business world.
Even before the court's decision, Kwak showed his willingness to take over SsangYong by placing an advertisement for Torres in the newspapers of the group's affiliates and on the billboard in front of KG Group's headquarters in Seoul. It is said that he did not receive any advertising fees from Ssangyong Motor and the move was directly ordered by the chairman.
The KG consortium will acquire SsangYong Motor for 935.5 billion won, including the acquisition price of 335.5 billion won and operating capital 600 billion won. Ssangbangwool Group, which emerged as a strong competitor by offering a higher acquisition price of 380 billion won, failed to convince the court of its ability to raise the funds.