Chinese-owned Ssangyong Motor of South Korea, hit by falling auto sales in the face of the global slowdown, said yesterday it had applied for court receivership to avoid bankruptcy.
Just two weeks after the automaker was turned down for new bank loans, the company said its Chinese parent Shanghai Automotive Industry Corp (上海汽車) had decided the move at an emergency meeting of its board on Thursday.
“The board of directors decided to apply for a court receivership in order to cope with the current liquidity crisis and turn the company into an entity capable of continuous growth,” Ssangyong said in a statement.
“At the same time, we will work out measures to normalize the company, and execute them strongly,” it said.
The application was filed with the Seoul central district court yesterday, a spokesman said. He said the courts will now decide “whether the company should be kept afloat or be liquidated.”
The court is expected to order Ssangyong Motor assets to be frozen to protect them from creditors before making a ruling on whether the company should be rescued or liquidated within a month.
It remains unclear whether there will be any appetite for Ssangyong among potential buyers as consumers are increasingly turning away from Ssangyong’s main line-up, Sports Utility Vehicles, amid the global economic crisis.
Ssangyong has fallen into financial crisis amid slow auto sales and a dearth of operating funds from its parent firm. It could not meet its payroll on time last month.
The state-run Korea Development Bank (KDB), Ssangyong’s main creditor, said late last month that it would not consider new loans unless Shanghai Automotive extended Ssangyong 320 billion won (US$250 million) of funding first.
In its statement, Ssangyong said it was facing a “serious liquidity crisis” because of the worldwide credit crunch and that losses were mounting in the current climate.
“The operating loss has been widening because of sharp falls in domestic sales and exports as well amid the global economic downturn,” the statement said.
Ssangyong expects to post a net loss of more than 100 billion won for last year.
Its sales reportedly slumped 29.6 percent last year to 92,665 units including 53,500 vehicles shipped abroad.
Its sales last month plunged 52.5 percent from a year earlier to 5,540 units. The board of directors also called for corporate restructuring, including redundancies and wage cuts.
The decision comes as the company’s labor union voted last week on a strike motion and was awaiting the outcome of the board meeting before deciding whether to count the ballots.