Ssangyong bankruptcy protection ends SAIC control

Ssangyong Motor Co., South Korea’s smallest carmaker, won court approval for bankruptcy protection, ending China’s SAIC Motor Corp.’s control over its Korean unit, said two people familiar with the court’s decision.

The Seoul Central District Court will name Park Young Tae, Ssangyong’s current financial director, and Lee Yoo Il, former president at Hyundai Motor Co., as receivership managers, said the people, who declined to be identified because the decision is not yet public. The court plans to make an official announcement later today.

Ssangyong, 51 percent owned by SAIC Motor, on Jan. 9 applied for a court receivership after vehicle sales plunged 30 percent last year as customers favored more fuel-efficient and new models at larger rivals. Under receivership, the court could seek liquidation if the company is deemed unviable, according to Korean regulations.

"The court’s decision just buys Ssangyong a little time," said Stephen Ahn, the head of research at LIG Investment & Securities Co. in Seoul. "The long-term viability of Ssangyong is still in question."

SAIC Motor’s parent initially purchased 49 percent of Ssangyong for $500 million in October 2004, to add sport-utility vehicles to its lineup and to help develop its own brand. SAIC aimed to move beyond being a low-cost assembler for General Motors Corp. and Volkswagen AG.

SAIC Motor spokeswoman Zhu Xiangjun didn’t answer calls made to her mobile phone.

Poor Lineup

Korea Development Bank, Ssangyong’s main creditor, with about 240 billion won in loans to the automaker, had earlier projected Ssangyong would need 600 billion won in fresh funds this year to stay afloat. The court froze all debt obligations, payments and asset sales from Jan. 12.

Under the receivership managers, the court will inspect Ssangyong’s financial condition and establish a turnaround plan. Ssangyong was under creditors’ control for nearly five years before SAIC’s parent purchased the shares. The stake was later increased, making Ssangyong the first overseas automaker to come under the control of a Chinese company.

Ssangyong’s annual vehicle sales have fallen 42 percent since 2002 as Hyundai Motor Co. and Kia Motors Corp. lured customers with newer and more fuel-efficient models.

"All the trouble began with Ssangyong’s poor line-up," said KB Investment & Securities Co. analyst Sohn Myung Woo. "It’s not just a cash problem or just a credit problem."

Ssangyong employs about 7,200 workers and builds seven models, including four SUVs and large sedans. The company sold 92,665 vehicles last year.

The automaker halted trading of its stock on Jan. 9, the day it filed for bankruptcy protection.