The government to search for new owner of SsangYong Motor

The South Korean government is likely to search for a new owner of SsangYong Motor Company to normalize the company, shifting away from its previous plan for a bailout to extend its life. In the worst case scenario, the automaker could go into receivership to reduce debt and be sold to a third party. The decision has been made based on the principal that corporate bailouts should be provided on the condition that large shareholders can share the pain.

The government and the financial sector said Tuesday that creditors including Korea Development Bank (KDB) had had working-level meetings with Mahindra Group, one of the large shareholders of SsangYong Motor Company, to revitalize the company since April and came to a conclusion that the Indian company seems reluctant to save the automaker. This is why experts expect Mahindra Group to sell its shares after it said it would find new investors on Monday. “It is still not confirmed, but finding new investors should mean selling its shares,” said a source from the government.

The shares held by Mahindra Group are valued at around 250 billion won including a 50 billion won premium for its experience and expertise. Experts say that it is a good value for an automaker even though it would depend on the situation of the company. “It is true that there is uncertainty around the sustainability of SsangYong Motor Company, but there will be potential buyers if the government provides support,” said a source from the investment bank industry.

The automotive industry has discussed the possibility of the South Korean government tapping into the 40-trillion-won fund created to help key industries through the COVID-19 crisis to bail out SsangYong Motor Company. However, the government is not fond of the plan as it is designed to provide liquidity for businesses hit by the novel coronavirus not to help out those who already had problems before the outbreak.

Moreover, the fund is provided in the form of a bridge loan, which makes it even more inadequate for the automotive company that is in great trouble having been in the red for 13 quarters in a row. “The fund committee is unlikely to use the money to help SsangYong Motor Company,” said a government official.


kalssam35@donga.com