Ssangyong Motor says it could be forced to liquidate

The future of Ssangyong Motor grew gloomier yesterday as management said it is considering filing for bankruptcy and liquidating the company after failing to hammer out an agreement with its labor union, which has been on strike at the automaker’s plant in Pyeongtaek for more than two months.

“There will be no more talks until the labor union changes its attitude and accepts our last offer,” Lee Yoo-il, one of the struggling company’s two court-ordered trustees, said yesterday. “Strict legal action will be enforced against the violence and the illegal strike by the labor union.”

It was a final warning from management after negotiations over layoffs and related issues broke down. The two sides had met seven times since last Thursday but couldn’t hammer out a final deal, unable to agree on how the 974 proposed job cuts would play out.

Management offered to secure the jobs of 40 percent of employees, or roughly 400 slated to be laid off - double the offer made before the negotiations began. Executives said they would put 290 of those employees on unpaid leave for awhile and convert 100 plant workers to salesmen.

Additionally, the company said it would shift 253 workers to Ssangyong departments that will be separated from the automaker as part of its restructuring, while another 331 employees would be laid off and listed as having taken voluntary retirement. The labor union, however, insisted on guaranteeing the jobs of all employees and adopting a system that would circulate the workers on unpaid leave.

Company executives argued that such a plan goes against the fundamental goal of reviving the automaker through corporate restructuring, which was approved by the court.

The two sides also failed to reach an agreement on lawsuits related to the ongoing strike. Ssangyong management said it would drop the suits against the labor union related to the financial damages from the strike. But the company did not say it would not do the same for civil and criminal lawsuits against those who acted violently. The labor union demanded that all civil and criminal suits be dropped.

Management insisted that it can no longer wait for workers to stop striking, saying it will continue to cut the supply of power and water. In a statement, the company claimed that it was losing 700 million won ($570,000) every month in utility costs, including electricity, during the strike.

Additionally, as of Sunday the company said it suffered a production loss of 14,000 units, which amounts to roughly 300 billion won.

The automaker said that 4,600 workers, including top executives, will again try to enter the Pyeongtaek factory, though they didn’t say when.

If all else fails, management stated that it will have no choice but to liquidate the company.

The automaker still has a shot at survival if production resumes in August, management said.

It would take about two or three weeks to get the plant back in operation. The company said it will make a final decision on what to do next by Sept. 15, when its creditors are scheduled to meet. If the creditors determine that it is better to liquidate the automaker, the court’s debt rescheduling program will end.

Some observers think Ssangyong needs to take the type of restructuring steps made by General Motors, which filed for bankruptcy and restructured rather than liquidated.

“The production technology of Ssangyong Motor is far ahead of Chinese companies, and considering 200,000 people are involved with the company either directly or indirectly, a liquidation would have a huge effect,” said Shim Jeong-taek, an automobile consultant.

By Lee Ho-jeong, Kim Tae-jin [ojlee82@joongang.co.kr]