Auditors favor survival of Ssangyong Motor, court says

May 7, 2009 3:24 am 

SEOUL, May 6 — A South Korean court said Wednesday that auditors favored the survival of Ssangyong Motor Co. over its liquidation, raising hopes that the troubled automaker's restructuring plan will keep it afloat.

But auditors warned that Ssangyong, which has been under bankruptcy protection since February, could still face liquidation if it fails to cut 36 percent of its workforce as announced.

"Ssangyong Motor's continued existence is valuable," said an official at the Seoul Central District Court, citing audit results by the accounting firm Samjong KPMG Inc. "But rescue proceedings will be scrapped if conditions for restructuring and new loans aren't met."

The value of rescuing Ssangyong, which has been under bankruptcy protection since February, stood at 1.32 trillion won (US$ 1.03 billion), compared with the 938.6 billion won to be gained from liquidating the company, according to the court.

Creditors of Ssangyong will meet on May 22 to concretely decide on whether to save or liquidate the carmaker.

As part of its turnaround bid, Ssangyong, the smallest automaker in South Korea, announced a plan to cut 2,646 jobs, or 36 percent of its workforce.

On the news that the court would go ahead with Ssangyong's turnaround plan, shares of Ssangyong jumped 14.97 percent to close at 1,805 won on the Seoul bourse.

Unionized workers at Ssangyong said they will stage a partial strike again on Thursday to protest the company's job-cut plan.

Ssangyong was abandoned by Shanghai Automotive Industry Corp. (SAIC) in January after the Chinese parent refused to make any major effort to save its affiliate.

Ssangyong, which has an annual production capacity of 200,000 vehicles, posted a net loss of 709.7 billion won in 2008 on sales of 2.5 trillion won, down 20 percent from a year earlier.

In the first three months of this year, Ssangyong's vehicle sales dived 76 percent to 6,471 units.

With the bankruptcy protection, SAIC, which still owns a 51-percent stake in Ssangyong, relinquished its control of the South Korean carmaker. (PNA/Yonhap)

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