Ssangyong Motor Co., yesterday filed for court receivership after its Chinese parent decided to abandon management rights over the carmaker, which is suffering from a serious liquidity crisis.
The decision was made by the board of directors at Shanghai Automotive Industry Corp. in China, the parent of Ssangyong.
The carmaker was Korea`s fifth-largest automaker.
"The company has been suffering from a serious liquidity crisis because of plummeting vehicle sales. The company had difficulties in raising funds due to a serious credit crunch globally," Ssangyong said in a statement.
"We tried to save the company by contacting the government and financial institutions, but ultimately failed. It was an unavoidable choice."
Under court receivership, Ssangyong will earn time to restructure itself into a profitable automaker as it freezes the company`s debt and protects itself from creditors.
However, SAIC loses control of Ssangyong with the court protection, the company added.
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As part of its restructuring plan, the carmaker will cut up to 30 percent of salaries of its 7,200 employees for the next two years and receive applications for voluntary retirement, it said. The company did not announce plans for layoffs or financial support from its Chinese parent.
Ssangyong, based in Pyeongtaek, Gyeonggi Province, suspended its share from trading in Seoul.
The automaker, 51 percent owned by SAIC, needs to pay back 300 billion won ($224 million) to a group of local lenders including the state-run Korea Development Bank. KDB is the automaker`s biggest creditor.
According to sources, the Korean government and creditors will discuss whether to help the automaker stay in the business after studying its impact on the local economy.
Ssangyong reported a net loss of 98 billion won in the January-September period last year, caused by a global slowdown and drastically dropping sales of SUVs.
In a period of rising fuel prices the company`s management had made a fatal bet on SUVs -- the company`s signature vehicle.
SAIC reportedly demanded Ssangyong cut up to 3,000 jobs, including half of some 5,200 factory workers.
If Ssangyong and its union accept the restructuring plan, SAIC will reportedly provide $200 million to the cash-scrapped company.
But in a bold move, Ssangyong Motor`s labor union had said it won`t company with any restructuring measures.
The union even went as far as threatening to strike if the owners of the company restructured their business.
In 2004, SAIC bought a 51 percent stake in Ssangyong for $500 million. This was the first direct investment by a Chinese company in a Korean company.
By Cho Chung-un

(christory@heraldcorp.com)