By Kim Hyun-cheol
Staff Reporter
Ssangyong Motor's filing of court receivership Friday is expected to test Korea-China relations, many Seoul analysts predicted.
The reaction came out after China's Shanghai Automotive Industry Corporation (SAIC), the major shareholder of the nation's smallest carmaker, announced that it filed an application with the Seoul Central District Court to protect Ssangyong from creditors and normalize its operations after a board meeting in Shanghai.
A researcher of the state-funded institute predicted the bilateral ties may go sour unless the Korean government bails out Ssangyong as SAIC is de facto owned by the Chinese government.
He said the South Korean government has extended a helping hand to troubled carmakers such as Hyundai, Daewoo and Renault Samsung. If a rescue is not carried out for Ssangyong, it may send the wrong message to Chinese leaders, who might think the Korean government has ``discriminated'' against China-owned Ssangyong.''
Another analyst said the court receivership could be the first step for SAIC to withdraw from Ssangyong Motor. Last year, Ssangyong shares fell more than 80 percent and its trading was suspended Friday after it filed for a court protection.
But Ssangyong said in a statement that it had claimed the application didn't necessarily mean SAIC would give up the troubled company, adding that it was seeking the receivership to cope with the ballooning cash flow problem and to be reborn as a sustainable company, and that plans for normalizing its management would be finalized as soon as possible. It has not announced any plan for layoffs or cash injection from SAIC, but Ssangyong said it would trim costs through voluntary retirement, paid leave and job sharing.
As of November last year, Ssangyong's total debt reached 1.46 trillion won. It also reported a net loss of 98 billion won in the first to third quarters last year.
No detailed plans for layoffs or financial support came out from SAIC.
"SAIC is still the main shareholder and will fulfill its responsibility," said Chung Mu-young, a Ssangyong spokesman.
SAIC has recently been under pressure from the Korea Development Bank (KDB), Ssangyong's main creditor, to inject capital into its Korean affiliate. It purchased a controlling 51 percent stake in Ssangyong for $500 million in 2004, currently valued at less than $100 million, a Seoul banker said.
Negotiations will start with its labor union on cost-reduction programs, the carmaker said.
The announcement angered the labor union, which has been in conflict with management particularly since SAIC has reportedly demanded Ssangyong cut nearly half of its manufacturing workers in return for a cash injection.
Last month, unionized workers threatened legal action against SAIC for the alleged illegal transfer of the company's vehicle-developing technology to China and not living up to its pledge to invest 1.2 trillion won since taking over Ssangyong.
The 5,200 member-strong union said Jan. 9 will be remembered as the day "South Korea was trampled by China," saying SAIC gave up its due share of responsibility by filing for the receivership.
It held an emergency meeting Friday to chart its course of action.
Ssangyong's creditors, including KDB, are expected to discuss the matter after grasping the impacts of the receivership and the company's chances of reviving," an official of the state-run bank said.