Sales negotiations between India's Mahindra & Mahindra, a major shareholder of Ssangyong Motor, and the U.S. HAAH, known as a potential investor, broke down.
The Korea Development Bank (KDB) said it will not provide additional support if Ssangyong fails to attract strategic investors.
KDB held a press conference on Feb. 2 to convey the situation of negotiations on the sale of Ssangyong Motor. Last year, Mahindra said it would sell its stake in Ssangyong Motor, and in December of the same year, Ssangyong applied for a corporate rehabilitation process and a self-restructuring support (ARS) program.
Since then, major shareholders Mahindra, Ssangyong Motor, and KDB have participated in discussions on how to sell Mahindra's stake as HAAH, a U.S. sales subsidiary of China's Cherry Motors, has become a potential investor.
Choi Dae-hyun, senior vice president of KDB, said, "It is difficult to proceed with additional negotiations through the investment attraction council because the differences between potential investor HAAH and Mahindra have not narrowed.
The KDB said it is difficult to manage a short-term court receivership based on the premise of Mahindra's stake sale as negotiations broke down.
"In order to proceed with the P plan, prior consultation between stakeholders is essential, but Ssangyong is currently preparing a related business plan," Choi said. "HAH left Korea without making a decision due to the delay in submitting Ssangyong's data."
In fact, as negotiations for the sale broke down, Ssangyong Motor is likely to go through court receivership. Senior Vice President Choi also said, "If the P plan is difficult, we have no choice but to go through normal rehabilitation procedures and will not inject new funds without securing strategic investors.``
He said, "We will only provide funds if Ssangyong Motor attracts SI and the business plan is recognized for its feasibility," stressing the attraction of strategic investors.
"It is not something that can be revived by only injecting funds into companies with accumulated losses of more than 1 trillion won over the past decade," Choi said. "In order to normalize Ssangyong Motor, we need to attract strategic investors with a high understanding of the auto industry."
Ahn Young-kyu, vice president of the corporate sector, said, "The creditors have asked HAAH for proof of financing, but they have yet to provide evidence. We understand that once Ssangyong's rehabilitation plan is drawn up, it will be issued to financial investors."
Regarding the support for Ssangyong Motor's partner companies, Ahn said, "We plan to use the existing program to support the major industry partners from 1 trillion to 1.5 trillion won, and the Periodic Industrial Stabilization Fund is providing operating funds."
Regarding the theory of discrimination between GM Korea and Ssangyong Motor, he explained that the situation between the two companies is different.
Vice President Ahn said, "GM Korea received $6.4 billion in support from the U.S. headquarters and promised to allocate new cars, and KDB provided $750 million as the second largest shareholder."
He added, "GM Korea is a structure that can expand production efficiency through exports even if the domestic market stagnates. The business structure is different from Ssangyong Motor, which relies on domestic demand."
