SsangYong loses $186 million in support from its parentSsangYong Motor’s ambition to turn to profit in the next three years hit a wall after parent company Mahindra & Mahindra (M&M) scrapped a major support plan amid heavy economic fallout from the coronavirus pandemic.
Yet, the Korean company says it will be able to keep going by selling idle assets and cutting wages.
“Despite a setback in M&M’s plan to inject new funds, SsangYong Motor will continue stabilizing employment and securing future competitiveness,” the Korean automaker said in a release Sunday.
“To secure liquidity, SsangYong Motor will consider selling non-core assets such as the Busan logistics center.”
The board of Indian automaker M&M, which owns 74.65 percent of the Korean company, decided Friday to withdraw a promise of 230 billion won ($186 million) in financial support to SsangYong Motor over the next three years.
“The M&M board took a decision that M&M will not be able to inject any fresh equity into SsangYong Motor and has urged SsangYong Motor to find alternate sources of funding,” the Indian automaker said in a release Friday evening.
The board, instead, agreed to a one-time, maximum injection of 40 billion won over the next three months.
It is has been a bumpy road for SsangYong Motor over the past decade. After it went into court receivership in 2009 in the aftermath of the global financial meltdown, M&M acquired 72.85 percent of the beleaguered automaker in 2011 for 550 billion won. The Indian company injected 130 billion won into SsangYong to get its business back on track.
In 2016, SsangYong managed to turn to a profit thanks to the popularity of its flagship Tivoli small SUV, but quickly returned to losses the next year. The company has posted net loss for 12 consecutive quarters.
Last year, it sold 135,235 units, a 5.6 percent year-on-year drop. It recorded a 281.9 billion won operating loss, a whopping 339.3 percent year-on-year hike.
M&M last year agreed to a 500 billion won support plan for the next three years to make the Korean automaker profitable again. It was said that 230 billion won would be directly invested by M&M while the remaining would be obtained from other stakeholders such as the Korea Development Bank, SsangYong’s main creditor.
M&M’s board on Friday said it would help SsangYong Motor find new investors.
The Korean automaker said it is able to operate normally without any layoffs, at least for now.
BY JIN EUN-SOO [firstname.lastname@example.org]
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