Korean Car Maker's Push for Loans Hits a Bump

SEOUL -- The global auto slump has battered Ssangyong Motor Co., South Korea's fifth-largest car maker by sales, leaving it short of cash and forced to delay salary payments. Now the car maker's effort to seek financial aid is hitting snags.
On Friday, executives of China's Shanghai Automotive Industry Corp., which owns 51% of Ssangyong, visited the South Korean government and Ssangyong's main creditor, Korea Development Bank, to ask for help.
But KDB set a condition: It will consider extending loans to Ssanyong only if SAIC first provided 320 billion won ($244.9 million) in financial aid to the car company.
"Ssangyong Motor must get financial support from its parent first," said a spokesman for state-owned KDB. "After SAIC's move, we may consider fresh loans to Ssangyong," he said.
A SAIC spokeswoman declined to comment on its talks with KDB.
Ssangyong hasn't been able to pay its workers this month. A spokesman said the payment may be delayed until next month. Ssangyong is halting production for almost three weeks, until early January.
Earlier this month, the company asked SAIC for emergency funds. It also announced restructuring plans that include output and welfare-benefit cuts. But the plan faced opposition from Ssangyong's labor union.
SAIC, meanwhile, says it won't help unless the labor union accepts the restructuring plan. Ssangyong President Choi Hyung-tak even said Wednesday that SAIC may pull out from the company if its labor union resists. But the company later said his comment was an appeal to everyone involved to work together to revive the car maker.
Ssangyong may still get help from the South Korean government indirectly.
The Knowledge Economy Ministry said Friday in a report on its business plan to President Lee Myung-bak that the government may consider measures to lend liquidity support to some auto makers.
"We can't directly help Ssangyong, but if SAIC and Ssangyong's labor union reach an agreement for the recovery of the company, the government could talk to its creditors," said Lee Dong-geun, deputy minister for industry.