SEOUL, April 12 (Korea Bizwire) — SsangYong Motor Co. said Sunday its parent Indian carmaker Mahindra & Mahindra Ltd. will inject 40 billion won (US$33 million) into its Korean unit to help it stay afloat amid a growing coronavirus impact on the auto industry.
In SsangYong’s extraordinary board meeting held Friday, Mahindra Managing Director Pawan Goenka explained the cash injection plan to directors, who approved of it, a company spokesman said by phone.
“The emergency fund will clearly show Mahindra remains committed to SsangYong and reduce market speculation that Mahindra may exit South Korea,” he said, adding the fund will be funneled to SsangYong as early as this month.
Mahindra said early this year it will inject 230 billion won into SsangYong for the following three years after obtaining approval from its board.
But Mahindra’s board recently voted against the investment plan as the spreading COVID-19 outbreak is having a bigger impact on the global automobile industry.
Instead of the proposed 230 billion won, Mahindra has said it would consider a “special one-time infusion” of up to 40 billion won over the next three months to help SsangYong continue operations.
Moreover, Mahindra said it will help SsangYong attract investors, while seeking other means to help the carmaker avoid a short-term liquidity crisis.
But the company didn’t elaborate on what the other means will be.
Goenka had said a total of 500 billion won is needed to turn SsangYong around by 2022.
In January, Goenka met with Lee Dong-gull, chairman of the state-run Korea Development Bank (KDB), to ask the KDB to extend a financial helping hand to SsangYong.
Back then, he said Mahindra’s 230 billion-won cash injection could be made if the KDB extended a fresh loan to SsangYong.
In response to Mahindra’s decision, Financial Services Commission Chairman Eun Sung-soo said Monday that the financial authorities expect creditors of SsangYong will consult with each other over ways to put the carmaker back on track.
SsangYong has struggled with worsening performance since 2017, when it shifted to a net loss of 66 billion won from a net profit of 58 billion won the previous year.
In 2018, its net losses continued, reaching 62 billion won.
In 2019, SsangYong’s annual sales fell 6.5 percent to 132,799 vehicles from 141,995 units a year earlier due to lower demand. Earnings results for 2019 will be released in the coming weeks.
From January to March, sales fell 31 percent to 24,139 units from 34,851 in the same period a year ago.
SsangYong’s lineup is composed of the flagship G4 Rexton, as well as the Tivoli, Korando and Rexton Sports.
In its own rescue measures, SsangYong already suspended some welfare benefits for employees in September last year and cut some of their wages and bonuses in December.
In bankruptcy proceedings in March 2011, Mahindra acquired a 70 percent stake in the carmaker for 523 billion won as part of its globalization strategy.
Mahindra currently owns a 74.65 percent stake in SsangYong Motor after two rounds of rights issues worth 130 billion won since 2013.