(ATTN: ADDS financial authorities' response in 12th para)
By Choi Kyong-ae
SEOUL, April 6 (Yonhap) -- SsangYong Motor Co. said Monday it will sell non-core assets to stay afloat after its parent Mahindra & Mahindra Ltd. nixed its capital injection plan for the carmaker due to the growing impact of the coronavirus.
Indian carmaker Mahindra & Mahindra said early this year it will inject 230 billion won (US$186 million) into SsangYong Motor for the following three years after obtaining approval from its board.
But Mahindra's board has recently voted against the investment plan as the spreading COVID-19 outbreak is having a bigger impact on the global automobile industry, according to SsangYong Motor.
The decision has sparked speculation that it may exit South Korea after selling the money-losing SsangYong Motor.
"Instead of the proposed 230 billion won, Mahindra will consider a special one-time infusion of up to 40 billion won over the next three months to help the South Korean unit continue operations. The emergency fund clearly shows Mahindra remains committed to SsangYong and the South Korean market," a SsangYong Motor spokesman said over the phone.
Moreover, Mahindra will help SsangYong attract investors, while seeking other means to help the carmaker avoid a short-term liquidity crisis, he said.
But the company didn't elaborate on what the other means will be.
Mahindra Managing Director Pawan Goenka had said a total of 500 billion won is needed to turn SsangYong around by 2022.
In January, Goenka met with Lee Dong-gull, chairman of the state-run Korea Development Bank (KDB), to ask the KDB to extend a financial helping hand to SsangYong.
Back then, he said Mahindra's 230 billion won worth of cash injection could be made if the KDB extended a fresh loan to SsangYong.
In response to Mahindra's decision, Financial Services Commission Chairman Eun Sung-soo said on Monday that the financial authorities expect creditors of SsangYong will consult with each other over ways to put the carmaker back on track.
SsangYong has struggled with worsening performance since 2017, when it shifted to a net loss of 66 billion won from a net profit of 58 billion won the previous year.
In 2018, its net losses continued, reaching 62 billion won.
In 2019, SsangYong's annual sales fell 6.5 percent to 132,799 vehicles from 141,995 units a year earlier due to lower demand. Earnings results for 2019 will be released in the coming weeks.
From January to March, sales fell 31 percent to 24,139 units from 34,851 in the same period a year ago.
SsangYong's lineup is composed of the flagship G4 Rexton, as well as the Tivoli, Korando and Rexton Sports.
In its own rescue measures, SsangYong already suspended some welfare benefits for employees in September last year and cut some of their wages and bonuses in December.
In bankruptcy proceedings in March 2011, Mahindra acquired a 70 percent stake in the carmaker for 523 billion won as part of its globalization strategy.
Mahindra currently owns a 74.65 percent stake in SsangYong Motor after two rounds of rights issues worth 130 billion won since 2013.
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