[Editorial] Gov’t Not to Blame for Ssangyong Fiasco

Ssangyong Motor’s chances of going bankrupt are rising as its union has occupied the company’s plant for 70 days in a sit-in protest. The government says that even if the workers end their strike, the carmaker has little chance to survive. Hence, it is discussing measures to minimize the impact on Ssangyong’s impending bankruptcy on its parts makers and the economy in Pyeongtaek, Gyeonggi Province, after the company’s liquidation. The union rejected corporate restructuring suggested by the court and creditors as a prerequisite for Ssangyong’s survival, and is hastening the carmaker’s inevitable bankruptcy through a prolonged walkout.

The strike has suspended production of 13,556 vehicles through Tuesday. The company lost 125.7 billion won (101 million U.S. dollars) in the first quarter alone. Prior to the strike’s launch May 6, Ssangyong’s value was appraised at 389 billion won (310 million dollars), and the assessed figure was higher if it continued operations instead of being liquidated. The calculation was based on the meeting of three conditions: the layoff of 2,646 employees; injection of 250 billion won (200 million dollars) by Korea Development Bank; and the development of six new vehicle models over the next five years. Now that production and sales have all come to a halt, however, the company could be worth more dead even if the strike ends.

Ssangyong’s suppliers will also submit a request Aug. 5 seeking conditional bankruptcy of the troubled automaker. They proposed that if Ssangyong is put under bankruptcy initially and a “good Ssangyong” is created in the same way the “new GM” was, creditors are willing to convert debts worth 300 billion won (240 million dollars) into equity. The proposal also includes a pledge by suppliers to take on all Ssangyong workers who voluntarily resign. The move seems to be the suppliers’ last appeal since they can no longer endure further hardship. It may be difficult for the court, which must decide whether to put Ssangyong under bankruptcy, to accept the request while the carmaker is still under court receivership. Nevertheless, it needs to carefully consider the measure.

Suppliers demanding Ssangyong’s early bankruptcy are faring no better than the automaker. More than 300 suppliers, or about half the company’s total, have suffered damage worth 89 billion won (70 million dollars). If losses due to parts in stock at the Ssangyong plant and other suppliers are included, the estimated damage is 200 billion won (160 million dollars). Ssangyong’s bonds worth 380 billion won (306 million dollars) held by suppliers and subcontractors could also become useless.

Thirteen suppliers have gone bankrupt or are under court receivership, while another 10 have been liquidated. More than half of suppliers are in such a difficult situation that they have suspended operations or let their staff take rotational leave. This means they cannot afford to wait until September, when the court is scheduled to rule whether to put the automaker under bankruptcy. Under these circumstances, opposition lawmakers and civic group members yesterday went to the Pyeongtaek plant and held protests, urging the government to step in and resolve the situation. Public assistance for a company facing bankruptcy due to striking workers, however, will not only run counter to principle but also be opposed by the public.