Who cares for Ssangyong Motor?The militant Korean Confederation of Trade Unions and progressive media dismissed the management of Ssangyong Motor’s decision to reinstate 455 workers who have been on unpaid leave for the last three years as a sneaky move to avoid a legislative investigation. They also sneered that the workers will soon be dismissed as redundant due to the light workload at the country’s smallest automaker.
The leftists blame the company for everything evil, from sales to unsuitable foreign buyers, accounting fraud, intentional bankruptcy and planned layoffs. They provoke resentment and hostility from the weak by highlighting the sit-in atop a power pylon by some workers and the suicides by 23 laid-off Ssangyong workers or their family members. But it is time that we strip away all the political mumbo jumbo and look straight at the core of the automaker’s problems.
How has Ssangyong Motor come to such a pitiful state? Flight by overseas capital, chain strikes and layoffs are only peripheral problems. The main reason is that the company has lost competitiveness. It fell behind because it failed to read the market trends. Ssangyong’s main models like the Korando and Musso are diesel-powered sports utility vehicles with engines of above 2.0 liters. Diesel prices, however, have shot up over the last decade, costing almost as much as gasoline from half the price before.
It also lost its edge because Hyundai, GM Daewoo, and Renault Samsung all turned out SUVs. But their SUVs were curvier and more cost-effective. While on a roller-coaster ride of insolvency and court receivership, the company found itself out of the race.
Ssangyong Motor last year sold 47,700 vehicles at home and 73,017 overseas. Of the total shipment, 32,328 went to Russia. Their bulky style and durability sold well in the harsh climate of Russia. Its overseas exports of complete knock-down kits - or vehicles assembled in the country of destination - also helped to bring down the sticker price as kits avoid Russia’s 30-percent tariff on imported cars.
Is the company finally being reborn? Few can confidently say it is. It lags far behind in scale as it turns out just half of its annual production capacity of 250,000 units. Also, diesel is no longer an attractive option as it often costs more than gasoline in many parts of the world.
At home, the company mostly sells pick-up trucks like the Actyon and Korando. They are classified as trucks and can save drivers some annual tax payments. Hefty gasoline prices have steered buyers to fuel-efficient cars. But Ssangyong’s line-up is mostly bulky SUVs with low fuel efficiency. It remains uncertain how long it can do well in Russia. Since joining the World Trade Organization in 2011, Russia has restricted loan companies for automotive lease financing and demands automakers use more than 60 percent of parts from home to protect the local car industry.
Workers are not the only victims in Ssangyong Motor’s demise. Parts suppliers have been crushed and so were the minority shareholders. The Korea Development Bank and a host of other banks have little hope of getting their loans back. Shanghai Automotive Industry, which bought a 51 percent stake in Ssangyong Motor in 2004, withdrew without earning much except for a bad name for stealing the company’s engine technology and having made a predatory investment. Yet Beijing cites Ssangyong Motor as one of its worst investment cases ever.
What Ssangyong Motor desperately needs now is investment. Its new Indian owner, Mahindra & Mahindra Limited, must deliver the promised 1 trillion won ($947 million) investment. The automaker should develop eco-friendly and fuel-efficient smaller-engine vehicles to attract consumers. It must increase its output and sell at least 250,000 vehicles to overseas markets a year.
The Ssangyong management is on pins and needles as it awaits approval for its investment plans from Mahindra’s board of directors. Yet local politicians are vociferously demanding a legislative probe into the tragedy of the company while labor activists violently attack showrooms that advertise its new models. All of this can jeopardize the company’s lifeline.
The opposition likes to raise the Ssangyong Motor issue whenever it can. It conjures up the image of wives of Ssangyong Motor employees pleading to opposition lawmakers who joined the sit-ins during the strikes to leave the sites four years ago. If they really care for the workers, those lawmakers should leave Ssangyong be. If they are truly sincere about their jobs, they should purchase one of the company’s cars to help increase its workload.
When Ssangyong offered discounts to newly-elected lawmakers last year, it sold only one car. The buyer was a Saenuri Party representative. So we ask: Who really cares for the company?
*The author is an editorial writer of the JoongAng Ilbo.
by Lee Chul-ho