SsangYong Motor's labor union OKs restructuring plan

SsangYong factory workers assemble a car engine at the company's Pyeongtaek plant in Gyeonggi Province. Courtesy of SsangYong Motor

By Kim Yoo-chul

Unionized workers at Ssangyong Motor have agreed to accept heavy restructuring measures after the cash-strapped automaker confirmed its intention to look for a buyer by October of this year.

The ailing automaker said Tuesday that 52 percent of unionized workers accepted management's proposal to furlough employees and cut the wages of remaining staff. Out of 3,224 unionized workers, 1,681 accepted the company's proposal.

With the labor union's approval, SsangYong workers will take two-year unpaid leaves on a rotating basis. The program will affect all of the automaker's 4,700 employees, including 1,200 non-manufacturing workers, it said in a statement, adding that all company-provided welfare benefits will be suspended until June 2023.

SsangYong's management decided to implement an additional 20-percent wage cut (their wages had already been cut by 20 percent). The automaker also plans to sell off more assets, while unionized workers vowed not to hold a strike for an unspecified number of years.

After its majority owner, Mahindra & Mahindra (Mahindra), pulled out of the ailing automaker, SsangYong Motor approached potential investors to help it stay afloat. However, such last-ditch efforts were in vain, mostly because of heavy labor costs, according to officials involved with the issue.

SsangYong Motor is now positioned to submit an updated restructuring plan to a court by the first week of July, thanks to the union's consent. The company is also planning to invite new investors by the end of June, at the earliest. After Mahindra's departure, SsangYong fell under court receivership.

U.S.-based HAAH Automotive is still said to be interested in acquiring the South Korean carmaker as it was hoping to become a major player in the booming electric vehicle (EV) industry. Plus, smaller EV bus manufacturer Edison Motors, along with a consortium of EV makers with private equity funds (PEFs), are showing interest in acquiring a controlling stake, according to officials.

The estimated value of this stake could be around $270 million, as offered earlier by HAAH Automotive. Given its high debt levels, as well as the required time and investment needed for the development of new products, market analysts say it won't be easy for SsangYong to find the “right investor.”