Car company hopes to bail out ailing Korean unit

Pawan Goenka

Mahindra & Mahindra looks set to inject additional money into its cash-strapped Korean unit, SsangYong Motor, in a move to seek help from SsangYong’s main creditor bank, industry sources said Friday.

During Thursday meetings in Seoul with SsangYong’s labor union and Lee Dong-gull, chairman of the state-run Korea Development Bank (KDB), Mahindra & Mahindra Managing Director Pawan Goenka said the Indian carmaker will make a 230 billion won ($198 million) investment after obtaining approval from its board, a person familiar with the matter told Yonhap News Agency over the phone.

On Thursday, Goenka flew to Seoul in an apparent move to seek a financial helping hand from the KDB. The KDB extended a loan of 100 billion won to SsangYong last year.

“Goenka will leave for India today, and he will participate in SsangYong’s board meeting scheduled for Jan. 30 through video conference from India,” a SsangYong Motor spokesman said.

In March 2011, Mahindra acquired a 70 percent stake in the carmaker in bankruptcy proceedings for 523 billion won as part of its “globalization strategy.”

Mahindra currently owns a 74.65 percent stake in SsangYong Motor after two rounds of rights issues worth 130 billion won since 2013.

During a meeting with the carmaker’s labor union in India late last year, Mahindra hinted that it would consider injecting 230 billion won into SsangYong to normalize its business in return for an additional loan by the KDB.

In a statement released hours after the meeting between Goenka and Lee, the KDB said that Mahindra underlined that it, as the largest shareholder, is making “responsible” efforts to revive SsangYong Motor.

“On top of its direct investment plans for a turnaround in SsangYong Motor, Mahindra said its business ties with the world’s leading carmakers can help reinforce the competitiveness of the Korean unit,” the statement said.

According to SsangYong Motor, Mahindra is also positively looking into investing in electric vehicles.

The KDB didn’t say whether Mahindra asked for a fresh loan for SsangYong to help it keep up its operations.

KDB said it expects SsangYong Motor to quickly normalize through cooperation among interested parties.

SsangYong Motor has struggled with deteriorating earnings results since 2017, when it shifted to a net loss of 66 billion won from a net profit of 58 billion won a year earlier. In 2018, net losses continued, reaching 62 billion won.

For the whole of 2019, SsangYong Motor’s sales fell from 141,995 vehicles to 132,799, or 6.5 percent. Earnings results for 2019 will be released in the coming weeks.

SsangYong’s lineup is composed of the flagship G4 Rexton, Tivoli, Korando and Rexton Sports.

Yonhap