SsangYong Motor Co. is pushing for an intensive restructuring program as its performance is getting worse. It released a statement, endorsed by its executives and employees, at the end of last month to announce the program, which will come into effect in September.
The company plans to slash the number of executives by 10 to 20 percent, reduce unnecessary costs, carry out partial reorganization and introduce a sabbatical year system.
The company said these measures are inevitable as the company's first-half earnings suffered the sharpest decline since the second half of 2011. It also saw its debt ratio rising sharply and capital impairment worsening.
The company said its executives and employees endorsed its restructuring plan as they have learned the importance of a proactive response to a crisis through the tough times they had experienced before. In particular, the labor union, which saw a crisis approaching, closed the collective wage bargaining negotiations without a dispute on Aug. 2 before the summer vacation started this year.
However, market experts say that the company is facing a daunting challenge to recover its snowballing deficits. SsangYong Motor posted an operating loss for 10 quarters in a row until the second quarter of this year. Furthermore, the company’s operating losses grew to 76.93 billion won (US$63.59 million) in the first half, though it sold 70,277 more cars than a year ago. The figure increased by more than two times compared to the first half of last year.
Analysts point out that SsangYong Motor focused on domestic sales and failed to boost its overseas shipments over the past few years. Its failure to develop new export markets has led to deficits.
SsangYong Motor is planning to cut down internal costs and boost overseas shipments in the second half. A company official said, “The only solution is to reduce costs in various areas, including production, research and development and sales, and continuously expand global sales through a wide range of marketing activities and overseas launching of new models. We now have a strong enterprise-wide will to break through the crisis.”