SEOUL, Jan. 25 (Korea Bizwire) — Financially troubled SsangYong Motor Co. said Monday it will cut its employee wages in half in January and February as it struggles with mounting costs amid lackluster sales.
In a recent message to employees, SsangYong Motor President and CEO Yea Byung-tae said the decision was part of “desperate measures” amid a sharp decline in sales.
In 2020, its vehicle sales fell 19 percent to 107,324 units from 132,799 the previous year.
SsangYong Motor’s lineup consists of the flagship G4 Rexton, as well as the Tivoli, Korando and Rexton Sports.
Last month, the South Korean unit of Indian carmaker Mahindra & Mahindra Ltd. filed for court receivership amid the coronavirus pandemic.
SsangYong is under court receivership for the second time, after undergoing the same process a decade ago.
Court receivership is one step short of bankruptcy in South Korea’s legal system. In receivership, the court will decide whether and how to revive the company.
The SUV-focused carmaker asked its main creditor, the Korea Development Bank (KDB), and other creditors to roll over the loans but failed to obtain approval from the lenders.
SsangYong also received a three-month suspension of its obligation to pay its debts, as it aims to find a new investor in the next three months before the court-led restructuring begins.
Mahindra is in the process of selling its majority stake in SsangYong as part of its global reorganization plan amid the COVID-19 pandemic.
The Indian parent has said it does not have a plan to inject fresh capital into SsangYong and will give up its status as the biggest shareholder of the Korean unit if it finds a new investor.
Early this month, Mahindra Managing Director Pawan Goenka said the Indian carmaker expects to conclude the deal by Feb. 28.
He said Mahindra will hold a 30 percent stake or less in Ssangyong Motor if the deal goes smoothly and will also carry out a capital reduction.
SsangYong has suffered losses in all of the past 15 quarters through the third quarter of 2020 due to a lack of new models and tougher competition with local rivals.
China-based SAIC Motor Corp. acquired a 51 percent stake in SsangYong in 2004 but in 2009 relinquished its control of the carmaker in the wake of the economic downturn.