If Ssangyong union doesnt restructure, then SAIC will quit Ssangyong
Recent news reports have said that Ssangyong is out of cash, and more shocking, they don’t have enough monies on hand to pay their workers salaries. Ssangyong’s biggest share holder, SAIC, own 51% of Ssangyong which gives them a controlling share in the Korean SUV maker. But when it came to the crunch last week, Ssangyongs request for a cash injection from SAIC to cover immediate running costs was denied. Rumor has it that SAIC is forcing the union to bend to its demands, as previously the union demanded that Chinese executives quit.
Chosun Daily gives us the round up on Ssangyongs financial failings:
Korea’s smallest carmaker Ssangyong Motors on Sunday said it cannot pay December salaries, which were due on Wednesday. Domestic carmakers saw a steep drop in sales in due to the worldwide economic crisis, but this is the first time a domestic automaker has failed to pay workers the money it owes them.
In letters to staff sent Friday, Ssangyong said, “The company is expected to post a deficit of more than W100 billion (US$1=W1,292) this year alone. Due to lack of operating funds for December, it is impossible for the company to pay salaries any longer.”
It had asked the head office of its parent company Shanghai Automotive Industry in China for emergency operating funds, but the request was turned because the in-house union had called for Chinese executives to resign, Ssangyong said. Shanghai Automotive took over Ssangyong in January 2005 by buying 48.9 percent stake, bringing holdings to 51.3 percent. Ssangyong employs about 8,000 staff — 2,500 white-collar workers and 5,500 production-line workers.
The Ssangyong executive committee plans a protest rally against management in front of the company’s Pyeongtaek plant in Gyeonggi Province at 8:30 a.m. on Monday.
Ssangyong began suspending the operation of all plants, including the Pyeongtaek plant, for three weeks last Wednesday. On Dec. 12, Ssangyong drastically downscaled its entire organization by merging the domestic business division, the overseas business division, and the services division into a single one, and fired a dozen key executives. A Ssangyong executive said, “The company will conduct an additional round of restructuring focusing on its business departments.”
With domestic sales dropping 34.5 percent from January until November, the number of Ssangyong’s dealerships has shrunk by about 60, from 237 early this year to the current 180. November sales alone fell by 63 percent year-on-year.
Bloomberg Asia then tells us more of the SAIC pull out:
Dec. 23 (Bloomberg) — SAIC Motor Corp., China’s largest automaker, may exit from Ssangyong Motor Co. if the South Korean company’s labor union doesn’t accept a restructuring plan, a lawmaker said after meeting Ssangyong’s head.
SAIC may pull out by early or mid-January, Jung Jang Seon, chairman of the Knowledge Economy Committee of South Korea’s National Assembly, said in a statement. Jung today met with Ssangyong Chief Executive Officer Choi Hyung Tak, he added, without giving details of the proposals before the labor union.
The Chinese automaker’s withdrawal will mean bankruptcy for Ssangyong, Choi said, according to the statement. Yonhap News yesterday said the company may not be able to pay December salaries on time due to a lack of funds for operations.
Cha Ki Woong, a Ssangyong spokesman, and Zhu Xiangjun, a SAIC spokeswoman, both declined to comment. SAIC owns 51 percent of Ssangyong. Yonhap News reported the possible pull out earlier today.
2008 appears to have been a roller coaster year for Ssangyong, first it was the oil spike which saw consumers ditching their SUVs (which Ssangyong only makes) and then the global credit crisis which left consumers with no credit to buy big ticket items, such as SUVs.
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If SAIC pull out of Ssangyong in Korea as rumoured and it goes bankrupt what happens to the worldwide network? Assuming SAIC own the copyright to the name what is to stop them giving the Koreans the middle finger, walking out and rebadging Chinese made Roewes as Ssangyongs to sell outside Korea??
Only die hard Ssangyong fans would really know the difference.
>>Only die hard Ssangyong fans would really know the difference.
Is there such a thing?
http://www.ssangyongclub.co.uk/forum/
seems so.
That’s odd there are actually Ssangyong fans, because there isn’t any in Korea.
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Ssangyong(Double Dragon) has been routinely ridiculed as Zzangyong(Which means Chinese Dragon) and like 90% of public oppose a Ssangyong bailout, they would rather see Ssangyong go bankrupt and push SAIC out.
@woxihuanpijiu
> If SAIC pull out of Ssangyong in Korea as rumoured and it goes bankrupt what happens to the worldwide network?
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Will be closed, most likely.
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> Assuming SAIC own the copyright to the name
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SAIC doesn’t own rights to brand and IP of Ssangyong; it owns a controlling interest of Ssangyong. The arrangement is similar to that of between Renault and Nissan. Renault owns the controlling interest of Nissan and dispatches management team, but GT-R is a property of Nissan, not Renault, and Renault may not make its own versions of Nissan vehicles without a proper license from Nissan management(who are Renault executives anyway). Upon Ssangyong bankruptcy, all rights to Ssangyong are reverted back to Ssangyong creditors, namely Korean banks.
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> what is to stop them giving the Koreans the middle finger, walking out and rebadging Chinese made Roewes as Ssangyongs to sell outside Korea??
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I hope now you now understand how one automaker controlling the other scheme works.
Yeah, thanks for that.
Basically it means that SAIC can walk out any time they want. The Korean creditors and public don’t care enough to bail Ssangyong out so maybe its best for them to disappear. All the blame for Ssangyongs failure can not be on SAIC.
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Koreans themselves need to front up, kick SAIC out and make Ssangyong profitable again. SAIC should pay what they owe first though or it will be more difficult in the future for other Chinese companies to by ailing Korean ones.
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The tech is gone, they won’t be able to get it back and to challenge them in Chinese courts will be a nightmare. SAIC is not to blame for all Ssangyongs woo’s….. time for them to move on.
@ woxihuanpijiu
> Basically it means that SAIC can walk out any time they want.
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Legally yes. But this would create an obstacle in SAIC’s future acquisitions(The word is that SAIC’s conserving its fund to make a bid on Chrysler), as it paints SAIC has a technology vampire who suck its victims dry and then move onto next victims…
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> All the blame for Ssangyongs failure can not be on SAIC.
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The banks that sold Ssangyong to SAIC blames Ssanyong’s current woos on SAIC’s failure to honor its promise of a $1.2 billion capital injection to bring out new models at the time of acquisition.
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> Koreans themselves need to front up, kick SAIC out and make Ssangyong profitable again.
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Ssangyong is too small to be saved. It’s a lost cause.
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> SAIC should pay what they owe first though or it will be more difficult in the future for other Chinese companies to by ailing Korean ones.
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There are no other ailing Korean-owned automakers left. The sole surviving Korean automaker is the 5th largest automaker in the world, too large to fail.
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> The tech is gone, they won’t be able to get it back and to challenge them in Chinese courts will be a nightmare.
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Well, Ssangyong creditors can block Ssangyong-based Roewe(4 out of 6) model sales in Europe until SAIC pays up $120 million owned for licensing those…
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> SAIC is not to blame for all Ssangyongs woo’s….. time for them to move on.
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But that’s exactly how the press is painting the picture right at the moment.
I can’t see the US govt allowing SAIC to purchase Chysler anyway due to the fact that the Chinese masters will never play ball with the UAW and vice versa. The Korean union is protectionist and thats their choice. SAIC has to pay its staff though, that is agreed 100%……paying the $120 million is a job for the high paid lawyers although usually the Chinese like cash up front, why didn’t the Korean creditors ask for the same when SAIC got involved?
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Hyundai is only 5th largest, they are still big enough to fail…… look at Chrysler and GM with their hands out. Hyundai is lucky in that they produce cheaper vehicles so they can still challenge the Japanese on some fronts.
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Being smaller as Ssangyong is means little. It’s whether there is anyone (person or company) in Korea with big enough balls to step up and take it on. If your product is good then it will succeed right? It seems to be that Koreans don’t want Ssangyong but still want SAIC to keep it going…. love those chicken and egg things
@woxihuanpijiu
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> I can’t see the US govt allowing SAIC to purchase Chysler anyway due to the fact that the Chinese masters will never play ball with the UAW and vice versa.
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UAW is no more if Chrysler assets are picked up at the bankruptcy court.
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> why didn’t the Korean creditors ask for the same when SAIC got involved?
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It was a transfer contract signed between SAIC and SAIC executives running Ssangyong. Creditors were not involved in this contract. Those four models cost at least $1 billion to develop(Remember, all Ssangyongs are engineered to be Euro-legal), yet SAIC managed to “license” those for only $120 million.
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> Hyundai is only 5th largest, they are still big enough to fail……
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Sure, when the no. 1(GM) could fail at any moment..
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> If your product is good then it will succeed right?
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Not necessarily. Ssangyong’s brand image was “cool” and was turning a $300 million annual profit until the SAIC take over. Then Ssangyong became Zzangyong(Chinese Dragon) and its brand image nose-dived, becoming just another Chinese-car. Ssangyong’s poor quality was suddenly blamed on Chinese, even though Ssangyong’s quality was always poor.
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> It seems to be that Koreans don’t want Ssangyong but still want SAIC to keep it going…. love those chicken and egg things
@ IHC
Ssangyong’s poor quality was suddenly blamed on Chinese, even though Ssangyong’s quality was always poor.
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so the Koreans never realized that one of their products were/are poor at the first place ?
@ mememe
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> so the Koreans never realized that one of their products were/are poor at the first place ?
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Ssangyong tried to hide its poor quality with perception of “Mercedes-licensed tech” brand image.
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When Shanghai took over, that perception was gone, it just became another junkmobile from China, even though SAIC had nothing to do with it.
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This is a problem Chinese automakers have to deal with in overseas markets, the strongly negative consumer image associated with the world China. I recall reading about an interview with a loyal Saturn customer what he would do if some Chinese automaker bought Saturn. He said he bought Saturns because they were American and German vehicles, it he would never buy a car from China. “China” as a brand is perhaps perpetually ruined by all the negative image, from lead-poisoned toys to melamine-tainted milk to Tibet and auto piracy controversies.
When one automaker controls the other, the only way it works well is if the parent company is bigger and more advanced than the subsidiary and is injecting money and its own technology into the subsidiary.
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The reverse cases, like Tata owning Jaguar/Land Rover, and SAIC owning Ssangyong and Rover assets, always end in disaster as the parent company is desperate to steal the technology of its more advanced subsidiary. The subsidiary doesn’t benefit from having a parent less experienced than itself, and eventually dies out.
Can’t really compare Tata to SAIC. Tata doesn’t need to own Jaguar/Land Rover and already have access to technology far above what Jag has. Jag may just be an extension of their already vast empire. Ford saved Jag and tried to make it profitable but couldn’t, Tata will have better luck if the Indian economy keeps growing like Chinas…. Different time and place for that conversation (eg, Indian car blog).
Its New Years Eve for goodness sake – go out and have a beer with your loved ones or friends.