Korean carmaker SsangYong’s future may hang in the balance after major shareholder Mahindra turned down a request for a near-$US400 million cash injection.
Mahindra holds a 74.65 percent stake in SsangYong.
Korean media reports quoted the Indian conglomerate as saying it remains committed to SsangYong, and would continue to “fulfill its role as SsangYong Motor’s main shareholder even if its equity position falls to No. 2.”
Mahindra’s announcement came after its board of directors met specially to discuss the company’s COVID-19 response and the SsangYong request.
It says it considered a request from SsangYong’s “management and labour union for a fresh injection of equity of 500 Billion Korean won ($US406m) over the next three years.
“After lengthy deliberation, given the current and projected cash flows, the board decided Mahindra won’t be able to inject any fresh equity into SsangYong and has urged it to find alternate sources of funding,”
However, to enable SsangYong to continue operating while it looks for alternative funding, the board has authorised Mahindra management to consider a special one-time infusion of up to 40 billion won ($US32m) over the next three months.
Mahindra will also “make every effort” to continue to support current initiatives to help SsangYong reduce capex, save costs and secure funds.
The board says it hopes SsangYong’s employees and management “understand the magnitude of the unfortunate and unforeseen crisis created by the COVID-19 virus, which has compelled (Mahindra) to take the difficult decision.”
Influencing the decision was India’s complete lockdown for three weeks because of the COVID-19 pandemic, and the dramatic drop in Indian new-car sales.
The board also initiated measures to tighten Mahindra’s capital allocation and ensure the company remains strong through the current crisis and beyond.
Korean media reports say that late last year, SsangYong’s debt totalled 410.1 billion Korean won in short- and long-term loans.
Its major creditor is the state-owned Korea Development Bank (KDB) which also holds 90 billion won of SsangYong debt that is due to mature in July.
Korean media says KDB refused to comment on a possible bailout of the carmaker.
Some industry pundits are suggesting that it’s a case of Mahindra saying to SsangYong: ‘we can’t put any money in so we want you to go to your government for help.’
SsangYong vehicles are distributed in New Zealand by Great Lake Motor Distributors which has established a high-profile network of dealerships which also sell Chinese-built LDV vans and utes.
General manager Andrew Bayliss says he hasn’t had a “concrete official statement” from SsangYong Korea, so doesn’t have enough information to make a comment.
“All we can say is at the moment we don’t really have any comment, but with the Indian market 88% down because of COVID-19, Mahindra and Mahindra are obviously tightening their belt.”
He says the Korean government has made $US8 billion available to businesses struggling during the COVID-19 crisis. “The Korean government has announced a rescue package (for businesses) and other automotive brands have dipped into it.”
SsangYong currently has about one percent of the New Zealand new car market, and Bayliss says Great Lake was looking to increase that before COVID-19 struck.
“This year was looking to be extremely good for us. We were launching the new Korando, with an EV version due later in the year, we have a diesel version of the Tivoli and the Rhino and Rexton are ticking along nicely.
“In one way or another we are very well positioned when we get back to work.”
