SEOUL, Dec. 19 (Korea Bizwire) — Workers at SsangYong Motor Co., the South Korean unit of Indian carmaker Mahindra & Mahindra Ltd., Thursday accepted a cut in bonuses and other cost-saving measures proposed by the company amid declining sales.
SsangYong Motor workers have agreed to the company’s proposals that require them to return some of their annual bonuses and performance-based pay, the company said in a statement.
In September, SsangYong Motor proposed some cost-saving plans to its 5,046 employees.
The plans include six months of paid leave, at 70 percent of their regular salary, for employees with 25 years of experience and a reduction in financial assistance for the workers’ medical expenses and their children’s education costs.
On Thursday, SsangYong Motor rose 4.1 percent to 2,015 won, far outperforming the broader KOSPI’s 0.08 percent gain.
“Investors appear to have responded to SsangYong Motor’s self-help programs and they expect its parent firm and state-run creditor bank not to sit by without extending a helping hand to the financially-troubled company,” Im Eun-young, an analyst at Samsung Securities Co., said over the phone.
Along with the self-help plans, SsangYong Motor said it is in talks with its parent, Mahindra & Mahindra, and others who have an interest in the company to ride out financial difficulties and continue operations.
The Indian parent has invested 130 billion won (US$112 million) in SsangYong Motor for the development of new vehicles, such as the Tivoli sport-utility vehicle, since its acquisition of the Korean unit in 2011.
SsangYong Motor has reportedly asked local lenders, including its main creditor, Korea Development Bank, KB Kookmin Bank and Woori Bank, to roll over 100 billion won worth of debt maturing in June.
SsangYong Motor has been struggling with declining sales due to fiercer competition with bigger rivals, such as Hyundai Motor Group and overseas carmakers.
In the January-September period, its net losses more than tripled to 185.5 billion won from 57.8 billion won a year earlier. Its sales fell 6.2 percent to 119,876 autos from January to November from 127,818 in the year-ago period.
The SUV-focused carmaker’s lineup includes the flagship G4 Rexton, Tivoli, Korando C and Korando Turismo.
Mahindra & Mahindra took over a 70-percent stake in SsangYong Motor for 522.5 billion won in 2011 and its stake increased to 74.65 percent following a 80 billion won rights issue in 2013.
SAIC Motor Corp. acquired SsangYong Motor in 2004, years after then parent Daewoo Group went bankrupt in 1999. The Chinese carmaker placed SsangYong Motor under the court’s receivership in 2009 amid the financial crisis.