SsangYong Motor has managed to sell one of its service centres located in the Guro district in Seoul to an asset management company PIA Investment Management. This decision come amid the rising debts and mounting losses the motor company is currently facing.
Through this sale it has managed to raise close to US$147 million as the korean auto major faces severe liquidity issues, according to reports in a section of Korean media. This is the second non-core asset SsangYong Motor has sold this year for more liquidity as it inches towards bankruptcy, say sources.
Infact SsangYong Motor’s external auditor has refused to sign the financial statement, citing discrepancies and its doubtful existence. The service center is being sold on the condition that SsangYong Motor will continue leasing it for the next three years.
With the company seeing poor sales over the last couple of years and Mahindra unable to turnaround the company in spite of ten years of management, a possible stake sale could also work out, say sources. Given the current global pandemic and the non reluctance of the company’s board to infuse any fresh long term funds, Mahindra may just be ready to sell at a decent price.
The company’s labor and management is understood to have reached out for help from the government and Korea Development Bank, but sources say it is yet to receive any response as the government is keen to fund only those companies affected by Covid, not otherwise.
Ssangyong needs to stay afloat and its short-term borrowings due to mature this year stand at 254 billion won, much more than 40 billion won that was recently injected by Mahindra, SsangYong’s parent company in India. However it’s immediate concern is to repay 90 billion won to Korea Development Bank this July.
Ssangyong reported a net loss of US$157 milion for the first quarter of 2020, it’s 13th consecutive quarterly loss.The company recently signed an annual wage deal with its union, to put off the annual wage increase for the company over the next one year.
Amidst the ongoing Covid 19 pandemic which has hit the auto industry hard, the Mahindra board in April decided to shelve its plans to infuse US$400 million equity in SsangYong to meet its next three year plan. This is in stark contrast to the announcements the company had made to this effect a month before.
While the official reason given has been the ongoing global uncertainty, it is no secret that the Korean auto maker is proving to be a high maintenance asset for Mahindra.
SsangYong Motor Company and its labour union had wanted Mahindra to inject equity to fund its 500 billion KRW (US$406M) of requirements over the next three years. Post this decision, the fate of Ssangyong hangs in balance and it will need to raise funds urgently. SsangYong had posted its highest ever yearly loss of US$341 billion Won in 2019.
M&M had paid Rs 2,100 crore (US$463 million) for the purchase of the Korean car maker a decade ago. But each passing year has been tough with falling sales numbers and negative financial records. SsangYong’s line up of vehicles include its flagship G4 Rexton, Tivoli, Korando and Rexton Sports.