ED Saving SsangYong Motor

Radical restructuring inevitable for troubled automaker

SsangYong Motor has been placed under court receivership once again. Last Thursday, the Seoul Bankruptcy Court approved corporate rehabilitation procedures for the automaker, ordering the company to submit a restructuring plan by July 1. The troubled SsangYong stands at a crossroads, with its fate resting in the hands of the court about a decade years after it emerged from a similar predicament in March 2011.

The carmaker's self-rescue plan is likely to include finding potential investors and a debt-rescheduling scheme. The court will conduct due diligence on the firm's financial status to figure out the size of its overall debt and decide if it would be better to keep it operating or to liquidate it. Some skeptics say it would be better to liquidate SsangYong, because the company owes its employees and subcontractors 370 billion won ($332 million).

However, SsangYong's breakup will result in the loss of at least 20,000 jobs and cause enormous damage to the regional economy. The government can ill afford to let it go under, especially with the presidential election only a year away. The court is also moving to find a new owner for the company. There are potential buyers, including U.S. vehicle importer, HAAH Automotive Holdings, and Edison Motors, a local electric bus manufacturer.

All this boils down to how SsangYong turns itself into an attractive offering by reducing costs and sharpening its competitiveness. If the troubled automaker's union is not prepared for radical restructuring in this regard, nobody will be interested in buying it. Given the company's weak bottom line and grim outlook, its would-be suitors will also demand various incentives, such as debt write-offs and financial support.

Arguments over the two extremes ― that the government should keep it afloat by all means or it must let any hopeless businesses go under ― are not desirable. In the long term, it would be better to rescue SsangYong Motor. However, the government's support should be based on justifiable and rational grounds. The management and union of SsangYong must show they are willing to make sacrifices and should present a solid revival plan and vision that will keep the company from sinking into insolvency and burdening the national economy once again.