Cash-strapped SsangYong submits self-rescue plan as it looks to bring investor on board

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Korean car maker SsangYong Motors has submitted a self-rescue plan to bring it out of bankruptcy. The plan has been a joint collaboration between the management and its workers, said two persons familiar with the development.

This even as parent company,

has been unable to find a buyer for SsangYong over the last 10 months, pushing the company into a crisis. Even as it struggles under court receivership, Korean car maker, SsangYong Motors looks to complete the sale process by finding a new majority investor by this October.

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The rehabilitation plan includes half of SsangYong’s staff taking unpaid leave up to two years in a bid to avoid retrenchment. “This sort of a plan will reduce potential job cuts but will definitely bring down labour costs. Workers availing of such unpaid leave would be allowed to return to work once the company starts making profits”, said one of the sources adding that the labour and management would hold wage negotiation talks every three years, instead of the earlier two.

SsangYong is expected to invite tenders by next month at the consent of the union. The court-appointed auditor Ernst & Young Hanyoung, is to oversee the sale process, according to sources.

With the increased push for electric vehicles globally , SsangYong is likely to see more EV bidders too in the fray. While US Based Haah Automotive continues to be in the game, others including electric bus maker Edison Motors and a consortium of EV makers along with a PE fund are also showing interest in picking up a stake.

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The value of the stake is likely to be fixed around 250 million dollars , offered earlier by Haah Automotive. Haah Automotive to an email query said it has no comments to offer while a Mahindra spokeswoman maintained, “It is a court run process and we cannot comment on it” .

“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. Usually, a company in the rehabilitation process will still want to find a new investor that can inject capital so that the company can get out of the process. Therefore, HAAH is still in the picture but it may have lost its exclusivity, allowing other potential investors to also negotiate with SsangYong”, said Seung Bum, Partner at Seoul based corporate law firm, Yulchon.

SsangYong has over the last few weeks cut a few senior executive jobs as it continues with its ongoing cost cutting drive. This has led to the worker unions to stage protests from its production base in Pyeongtaek asking for clarity from its main shareholder Korean Development Bank. The Seoul Bankruptcy Court on April 15 approved the debt-rescheduling process for SsangYong Motor as the US-based HAAH Automotive, the only front runner then did not submit a letter of intent (LOI) by the March 31 deadline.

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