Ssangyong Motor manager warns of liquidation

A court-appointed manager of Ssangyong Motor Co., South Korea's smallest automaker and the Korean unit of Chinese auto giant SAIC, acknowledged the risk of liquidation as creditors voiced doubts about the troubled company's viability, the manufacturer's union said Friday.

Ssangyong entered court receivership last month amid collapsing sales and dwindling cash reserves. It will be required to submit a turnaround plan to its creditors a bankruptcy court in Seoul by early April. If the plan is deemed unfeasible, the company will be liquidated.

"The creditors' stance is that liquidation is a better option to retrieve their debts from Ssangyong Motor," Park Young-tae, one of two court-appointed managers at Ssangyong, was quoted in a statement issued by the union.

Park, who served as Ssangyong's director of financing before he assumed the management role, made the remark at a recent meeting with employees, according to the statement.

"It's not a threat, but a fact," Park said, citing the results of an audit of the company's assets.

The remark comes amid local news reports that Ssangyong may have to slash one-third of its 5,200 assembly line workers to stay afloat.

Officials at Ssangyong's public relations team were not immediately available for comment.

Han Sang-kyun, leader of Ssangyong's union, strongly criticized Park for making the remark and called on the state-run Korea Development Bank, the carmaker's main creditor, to offer fresh loans. He also admitted that the company was desperate for cash.

"Unless new funds are offered in two or three months, Ssangyong Motor will get the ax," Han said.

Ssangyong is South Korea's first big corporate casualty of the global economic crisis, which has taken the wind out of demand for new vehicles and tightened credit conditions.

The carmaker has an annual production capacity of 200,000 vehicles. It posted a net loss of 709.7 billion won (US$481 million) in 2008 on sales of 2.5 trillion won, down 20 per cent from a year earlier.

Last month, Ssangyong's vehicle sales plummeted 69.4 per cent to 2,369 units.

With the bankruptcy protection, Ssangyong's biggest shareholder, China's Shanghai Automotive Industry Corp., relinquished its control of the South Korean carmaker, ending its five-year marriage to the company.