Ssangyong Motor seeks bankruptcy protection

Ssangyong Motor Corp, hit by the global slump in car sales, filed for bankruptcy protection on Friday, but its Chinese parent said it had not given up hope of reviving the South Korean automaker.

Global automakers are suffering the worst business environment in recent memory. Demand has plunged as the financial crisis spreads, squeezing credit and denting consumer confidence.

Ssangyong's move may give top shareholder SAIC Motor Corp an exit route amid worries about overcapacity in the global auto industry, analysts in Seoul said.

If the court accepts Ssangyong's filing, SAIC, which has a 51 percent stake in Ssangyong, will keep its stake but will have to relenquish control of the firm to the court.

"(Receivership) seems to be a way for SAIC to get out of Ssangyong. SAIC appears unwilling to invest further in Ssangyong as the global industry is facing an overcapacity problem amid slowing demand and it is not clear how much money would be necessary to revive Ssangyong," said Song Sang-hoon, an auto analyst at Kyobo Securities.

But Ssangyong officials insisted SAIC would continue to play its role as the top shareholder and help Ssangyong revive.

After the market closed on Friday, SAIC, China's biggest car maker, said in a statement it would work with all parties to try to normalise operations at Ssangyong. SAIC paid $500 million for 49 percent of the South Korean firm in 2004.

The stake was estimated to be worth 1.85 billion yuan ($271 million) at end-November under Chinese accounting standards, and the financial impact of Ssangyong's receivership on SAIC is now being evaluated, the Chinese company said.

Worsening environment

Ssangyong, like other carmakers worldwide, has cut production to cope with the worsening environment.

But it has been hit harder by the crisis than its peers, with its December sales down 53 percent compared with a 13 percent fall in the combined sales of the country's five auto makers.

The maker of the Rexton sport utility vehicle (SUV) had feared liquidation after posting its fourth consecutive quarterly net loss.

SAIC may seek to buy other car makers or brands instead of injecting more money into Ssangyong, some analysts said, as the recent industry downturn has forced major players such as the U.S. big three to sell their assets.

"There are better brands in the market now, which are waiting for new owners at attractive prices," said Kang Sang-min, an analyst at Tong Yang Securities.

Ford Motor Co (F.N) has put Volvo up for sale, while General Motors Corp (GM.N) and Chrysler LLC are straining to survive a deep slowdown in U.S. car demand.

"Ssangyong decided to file for court receivership to deal with an urgent liquidity crisis and to transform itself into a company with sustainable growth," it said in a statement.

The head of state-run Korea Development Bank (KDB), Ssangyong's lead creditor, said on Monday it was prepared to help South Korea's No.5 auto maker but only if it received fresh support from SAIC.

The KDB declined to comment after Ssangyong's announcement, saying the matter was now in the hands of the court and the Ministry of Knowledge Economy, which is in charge of the country's auto industry, had no official comment.

SAIC injected $45 million into Ssangyong at the end of December, according to the South Korean company.

In addition to court receivership, Ssangyong plans to take more measures such as cutting wages by up to 30 percent and accepting early retirement applications to revive its business.