Ssangyong Vendors on Their Own
By Lee Hyo-sik
Staff Reporter
Nearly 1,000 small businesses supplying auto parts to the beleaguered Ssangyong Motor are now facing massive bankruptcies as the government decided not to extend financial aid, leaving the fate of the automaker's subcontractors in the hands of creditors.
The Ministry of Knowledge Economy said Friday that the government will not introduce support measures aimed at helping Ssangyong subcontractors stay afloat. ``It is difficult for us to take extraordinary steps to extend the maturity of liabilities held by small auto parts makers dependent on the nation's smallest automaker. Our stance is to let creditor banks decide what to do about them,'' a ministry official said.
Its decision not to financially help Ssangyong subcontractors came at a time when the government is trying to implement an industry-wide restructuring program for struggling construction firms and shipbuilders. The government is reportedly concerned that supporting Ssangyong subcontractors could be seen as providing special favors to particular companies, which could invite protest from other struggling businesses.
``Like small shipbuilders and construction firms, Ssangyong parts suppliers will have to undergo a stringent workout program initiated and managed by creditors if they want to stay afloat,'' the official said.
Over the past weeks, the ministry has been consulting with the Financial Services Commission (FSC) about possible ways of helping Ssangyong subcontractors who have not received money from the carmaker.
Ssangyong has not paid its part suppliers in cash for months but instead issued them bills that mature in two to six months. But cash-strapped subcontractors cannot claim the credits against the automaker because it is now under court receivership.
Ssangyong filed for a bankruptcy protection on Jan. 9, freezing its assts and liabilities, after its parent company China's Shanghai Automotive Industry Corporate (SAIC) decided not to inject fresh capital into the struggling carmaker. The court will decide whether to put it under a debt workout program or liquidate it early February.
Being unable to receive payments from Ssangyong, auto parts makers grappling with a cash shortage turned to the government and creditors for the extension of loan maturity and provision of fresh credits.
With the government deciding not to provide aid, companies have no choice but to ask creditors for financial help. Shinahn Bank and other lenders have been extending credit to some Ssangyong part suppliers in recent weeks, holding the automaker's maturing bills as collateral.
``Some subcontractors are facing difficulties making interest payments. We will study each supplier and decide whether to prolong their liabilities and provide them with fresh loans,'' a Shinhan Bank official said.