Automaker Shanghai Automotive Industry Corporation (SAIC) does not seem to be in any hurry to abandon its strategy of purchasing stakes in overseas automobile firms, even as its South Korean unit Ssangyong decided to seek bankruptcy protection.
Hu Maoyuan, SAIC president, told Jiefang Daily on Tuesday that Ssangyong decided to seek bankruptcy protection after it suffered a liquidity crisis due to the ongoing global economic slowdown.
Collective efforts are now required from the Korean government, banks, workers' union and shareholders for the unit to remain viable, he said.
Ssangyong, which makes the Rexton, Actyon and Musso SUVs and the Chairman luxury sedan, saw demand for its vehicles plummet due to the economic woes. This in turn led to liquidity problems and forced it to seek bankruptcy protection.
The automaker decided to enter a "revival procedure" after reporting losses for four successive quarters. It submitted a plea in the Seoul court on Friday for a court receivership to avoid bankruptcy.
Ssangyong's parent SAIC said it agreed with Ssangyong's court receivership application. Earlier SAIC also said it would allocate 25.9 billion won (US$19.69 million) to ease Ssangyong's cash flow problems.
SAIC acquired a 51.33 percent stake in Ssangyong in 2004 through a US$500 million fund infusion. However, since November, the value of SAIC's holding in Ssangyong has fallen to nearly 1.851 billion yuan.
Zhu Xiangjun, a SAIC spokeswoman, refused to comment on the issue when contacted yesterday. "Everything is being handled under (the) related legitimate process," she said.
(China Daily January 15, 2009)