South Korea Accepts Ssangyong Bankruptcy Protection

A South Korean court on Friday accepted Ssangyong Motor's bankruptcy protection filing, giving the SUV unit of top Chinese automaker SAIC Motor another chance to survive after four loss-making quarters on plunging sales.

Ssangyong, which employs 7,100 and has been struggling to stay afloat in an industry that is going through its worst downturn in decades, is South Korea's first big corporate casualty as the global recession batters export markets.

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The auto industry has been forced to cut production, idle plants, lay off workers and delay spending, hit by a severe downturn in demand for big-ticket items as consumers globally face tight credit and fret over job security.

The court decision eased concerns over the impact of Ssangyong's possible failure on its parts suppliers and the overall job market in Asia's fourth-largest economy.

Ssangyong has more than 200 suppliers that employ around 90,000 workers, according to the Korea Auto Industries Cooperative Association.

Carmakers in Europe and the United States have sought government help to ride out the downturn.

"We concluded Ssangyong is not a company that needs to go into bankruptcy after reviewing reasons for the fall in sales and losses," Hong Junho, a judge and spokesman of the Seoul Central District Court, told Reuters by telephone.

Hong also said the court considered the potential impact of the company's failure on job markets.

With the decision, the court will manage and restructure Ssangyong to help the maker of the Rexton and Kyron sport utility vehicles stand on its own feet or find a new buyer, Hong had said previously.

The court appointed Lee Yoo-il, a former president of Hyundai Motor, and Park Young-tae, Ssangyong's director of finance planning, as managers of the company.

Under court management, Ssangyong's top shareholder, SAIC, will relinquish control but maintain ownership.

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SAIC estimated its 51 percent holding in Ssangyong was worth 1.85 billion yuan ($270.7 million) as of end-November. SAIC paid $500 million for 49 percent of the South Korean firm in 2004, and pumped $45 million into the company late last year.

The court had already frozen Ssangyong's debts, obligations and assets on Jan. 12 after it filed for court receivership.

Ssangyong is the first South Korean automaker to face severe liquidity problems since the Asian financial crisis in the late-1990s forced three car makers, including Kia Motors, to be sold.

Last month, Ssangyong posted an 82 percent slide in sales, while domestic market leader Hyundai Motor's sales dropped 27 percent.

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