Liquidation only option for Ssangyong as talks with labor fail

by Jamie Anderson - August 3, 2009 - 0 comments

Ssangyong Motor Co., the maker of the Rexton sport utility vehicle, is on the threshold of going in for liquidation. The automaker is 51 percent owned by top Chinese car maker SAIC Motor Corp

Seoul, Aug 3: South Korea's cash-strapped Ssangyong Motor Co. (003620.KS) may have no other choice but to go in for a liquidation after the board could not reach a consensus with its union over a job cut plan.

The fifth-largest South Korean car by vehicle sales, Ssangyong, has been in court-approved bankruptcy protection since February. The Seoul based automaker had, as a part of its restricting plan, decided to cut its work force by over a third.

The moot point
Translated into absolute numbers, Ssangyong’s lay off plan entails elimination of 7,000 employees. Close to 1,670 employees have already left the company, however, about 600 workers who have been fired refuse to leave and have been hindering work at the factory for over two months now.

The resultant stoppage in production lines has already cost the automaker 300 billion won ($245.4 million). Because of the workers paralyzing production, the auto manufacturer has produced about 14,590 vehicles fewer than it would have done under normal functioning.

If workers continue to stop production, liquidation would be a Hobson’s choice for the automaker.

“If law isn’t being applied strictly over the illegal factory occupation by the labor union and its violent actions, we cannot but review a possible liquidation. It is inevitable to consider applying for a rehabilitation plan on a premise of a liquidation," the automaker said in a statement.

A spokesperson of the management said that the automaker was willing to arrive at a compromise formula wherein it would keep more workers than decided earlier. However, the union is insisting on no layoffs.

"We proposed that we will guarantee 390 jobs, 40 percent of the laid-off employees, through leave without pay and by switching workers to salesmen, but the union insisted on a 100 percent job guarantee, which management could not accept,"

The union, in a released statement, termed the management's proposal as unacceptable. It promised to stage a "last-minute struggle" but did not elaborate on the same.

Fast approaching deadline
The cash strapped Ssangyong has time until Sept. 15 to submit a restructuring plan and avoid liquidation.

If the court decides to liquidate the company, the automaker will have to sell off its assets and distribute the proceeds to the creditors.

Meanwhile, 1,900 small vendors of Ssangyong have either gone under, or are on the brink of bankruptcy. Only 250 big parts suppliers have survived.

Last edited by Jaspreet Virk on Mon, 08/03/2009 - 10:34 | Write to author: Jamie Anderson |