SsangYong is on the edge of going bankrupt. The company is seeking help from other organizations in order to keep its operation going.
Ten years ago, Mahindra and Mahindra saved the Korean car brand SsangYong from bankruptcy by purchasing the majority of its stakes. Under Mahindra’s ownership, SsangYong has reinvented itself with improved products. However, these attempts could not revive its weak brand image. Now, SsangYong is facing the risk of bankruptcy under the ownership of Mahindra.
The main struggle of the South Korean car brand is the lack of global recognition. Therefore, despite the heavy investment on the new-generation products, SsangYong failed to capture the attention of international customers, hence, gaining underwhelming sales.
Without fresh investment, SsangYong Motor fell into a critical situation. As it failed to settle with foreign banks to extend the loan payment deadline, SsangYong has applied for an Autonomous Restructuring Support (ARS). If approved, SsangYong will be able to operate under the supervision of receivers. The South Korean car brand also filed an application for restructuring process to Seoul Bankruptcy Court. After examining and reviewing the submitted documents and papers, Seoul Bankruptcy Court will decide to approve the application of SYMC or not.
Last week, Mahindra announced that SYMC has missed the payment to JP Morgan Chase Bank, BNP Paribas, and Bank of America with the total amount of 100 billion KRW, approximately Rs 608 Crore. If the ARS is approved by the court, the recovery funds for creditors will be facilitated. It will also prevent the company from filing for bankruptcy. In other words, the SYMC is likely to see restructuring in order to pay off its debt while keeping the regular operation. Under this restricting program, SYMC will be allowed a period of 3 months to reach an agreement with stakeholders and creditors to settle down on a resolution such as equity and debt financing.
Mahindra is currently owning a majority of shares in SsangYong Motor Co. Earlier this year, in February, the Indian car company announced to invest Rs 2,800 Crore in Ssangyong. However, due to the global pandemic, Mahindra withdrew its proposal to invest in SsangYong. Instead, Mahindra has been looking for selling its stakes in its South Korean subsidy. At this point, comprehensive restructuring and new buyers are two possible ways to save SsangYong from the verge of going bankrupt. However, it remains to be seen if things can work out in the end. In related news, Mahindra is also planning to shut down Pininfarina Engineering as a part of its strategy to depart from loss-making ventures.