SsangYong's fate depends on additional investment, rebound in sales

By Choi Kyong-ae

SEOUL, June 15 (Yonhap) -- The fate of SsangYong Motor Co., the South Korean unit of Indian carmaker Mahindra & Mahindra Ltd., depends on whether it can receive financial help from either its parent firm or creditors and achieve a rebound in its sales, industry sources said Monday.

Mahindra hinted at the possibility of giving up control of the cash-strapped carmaker, as Managing Director Pawan Goenka said on a conference call with analysts and reporters on Saturday that SsangYong needs a new investor and Mahindra is working with the company for that purpose.

Mahindra Deputy Managing Director Anish Shah reportedly said Mahindra will not remain the biggest shareholder if an investor purchases a controlling stake in SsangYong.

The executive said Mahindra will review all of its loss-making business units over the next 12 months as parts of the company's broad restructuring efforts.

Mahindra, which holds a 74.65 percent stake in SsangYong, acquired a 70 percent stake in SsangYong Motor for 523 billion won (US$437.93 million) in 2011.

But SsangYong Motor has struggled with declining sales due to a lack of new models and Mahindra's recent decision not to inject fresh capital into the Korean unit. Its lineup consists of the flagship G4 Rexton, as well as the Tivoli, Korando and Rexton Sports sport utility vehicle.

Mahindra said early this year it will inject 230 billion won into SsangYong for the next three years after obtaining approval from its board. But its board voted against the investment plan in April, as the COVID-19 pandemic continues to affect vehicle sales in global markets.

Instead of the proposed 230 billion won, Mahindra said it would consider a "special one-time infusion" of up to 40 billion won over the next three months to help SsangYong continue operations.

The one-time cash injection falls far short of the 500 billion won Goenka had said is needed to turn SsangYong around by 2022.

Analysts said the capital injection could be just a quick-fix solution for SsangYong, but the fate of the SUV-focused carmaker largely lies in whether its vehicle sales will rebound.

SsangYong continued to report net losses in the past 13 quarters through the first quarter of this year.

In the first quarter, its net losses deepened to 193.54 billion won from 26 billion won a year earlier. Its sales from January to May fell 32 percent to 39,206 vehicles from 58,030 a year ago.

Faced with debt of 90 billion won maturing next month, SsangYong Motor recently sold a local after-sales service center in Seoul for 180 billion won to local asset management firm PIA and a logistics center in Busan, 450 kilometers south of Seoul, to an unidentified local company for 26 billion won.

"We have secured 246 billion won by selling the non-core assets and received the one-time injection from Mahindra. We will ask for a financial helping hand from the Korean government," a SsangYong spokesman said.

Still, industry sources said the government will find no reason to inject public funds into SsangYong as its controlling stakeholder Mahindra looks to exit the Korean unit amid the coronavirus outbreak.

kyongae.choi@yna.co.kr
(END)