Liquidity Crisis Not Over
SsangYong Motor announced on April 27 that it paid salaries 100 percent to all employees on April 24, even though it fell into a liquidity crisis due to Mahindra’s cancellation of a plan to pump 230 billion won into the automaker. Mahindra of India is the parent company of SsangYong Motor. Earlier this month, SsangYong Motor president Ye Byung-tae raised concerns about a liquidity crisis by saying that he was not sure about paying salaries 100 percent to employees.
SsangYong Motor seems to have turned a corner as it paid salaries normally in April. However, the carmaker’s short-term borrowings are still a problem. It should repay 540 billion won in short-term borrowings in 2020. In contrast, Mahindra has promised to provide up to 40 billion won in the next three months. But industry analysts say that the amount is not enough to cover the company’s fixed monthly cost.
Some industry experts suggest that SsangYong Motor may decide to apply for a workout before loans from Korea Development Bank fall due in July. This is because SsangYong Motor can hardly expect the same level of government support as that for the airline industry.
“SsangYong Motor has about 5,000 employees, the lowest level among automakers in Korea, and there is no concern about a technology leak from the automaker,” said an industry watcher. “The government has no justification for supporting SsangYong Motor alone.” SsangYong Motor has recently discussed support from KDB, but has reportedly failed to reach a conclusion.