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Ssangyong Motor Struggles to Seek Restructuring
Tightening Belt
Ssangyong Motor Struggles to Seek Restructuring
  • By Jung Min-hee
  • April 5, 2016, 01:45
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With the popularity of the compact SUV Tivoli, Ssangyong Motor had a surplus in Q4 last year for the first time in 8 quarters, but the management thinks that it still has a long way to go to normalize the business.
With the popularity of the compact SUV Tivoli, Ssangyong Motor had a surplus in Q4 last year for the first time in 8 quarters, but the management thinks that it still has a long way to go to normalize the business.

 

Ssangyong Motor Co. is struggling to slim down the size. Last year, the company reduced both the workforce and R&D costs, tightening its belt. However, market watchers say that there is a limit to improve the structure effectively with a simple cost-saving restructuring.

According to industry sources on April 4, Ssangyong Motor slashed both the workforce and R&D expenses last year. The number of its employees decreased from 4,829 in 2014 to 4,755 in 2015, while costs in R&D dropped 178.5 billion won (US$155.22 million) to 165.9 billion won (US$144.26 million) during the same period.

The movement is part of Ssangyong Motor’s efforts to turn its annual operating losses into profits this year, improving the efficiency. With the popularity of the Tivoli compact SUV, the company had a surplus in the fourth quarter last year for the first time in 8 quarters, paving the way to restore the company. But, the management thinks that it still has a long way to go to normalize the business.

Currently, Ssangyong Motor is reducing its workforce through attrition and minimizing the employment of new employees. An official from the industry said, “Since the company has a strong labor, it is hard to downside the workforce unilaterally. So, Ssangyong Motor has no choice but to improve the productivity while minimizing the union’s opposition.” In fact, the average annual salary of Ssangyong Motor went up by 10 percent from 70 million won (US$60,870) to 77 million won (US$66,957) last year, while the number of its employees fell 1.5 percent.

Also, the reduction in R&D costs is part of the company’s desperate measure. Its rate of R&D costs to sales dropped by 0.5 percent point from 5.4 percent in 2014 to 4.9 percent in 2015. Considering the fact that most automakers are increasing R&D expenses even when their sales and operating profits are going down, Ssangyong Motor is going in the opposite direction.

An official from Ssangyong Motor said, “The company’s R&D costs were high in 2014 in order to release the Tivoli early last year, and the figure has decreased since it doesn’t have a plan to launch the new model this year.”