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September 16, 2009

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Home » Business » Auto

SAIC's Ssangyong holding may be cut

SAIC, the nation's biggest car maker, may have less control in Ssangyong Motor Corp after the bankrupt South Korean company proposed to cut its stake by 80 percent.

In a turn-around plan proposed under court receivership proceedings, Ssangyong said it hoped to cut SAIC's holdings to 11.2 percent from 51 percent.

The Pyeongtaek-based company was put into bankruptcy protection in February after sales of its gas-guzzling sports utility vehicles plunged amid the global slump in the auto industry.

Ssangyong also plans to repay 1.23 trillion won (US$1 billion) of debt in the next 10 years and to transfer some of its debt into new equity.

Industry analysts said the reduced stake would provide a good exit for SAIC to quit the money-losing unit.

"SAIC has a well-developed product portfolio and quitting Ssangyong won't cause big problems for its financial performance in the long term," said Wang Liusheng, an analyst from Merchants Securities Co Ltd.

SAIC, the Chinese partner of General Motors Corp and Volkswagen, paid US$500 million for a 49 percent in Ssangyong in 2004, marking the first successful overseas acquisition for a Chinese car maker. It subsequently increased its stake to 51 percent.

The investment has been fraught with problems. Ssangyong's labor union accused SAIC of stealing technology and refused a survival plan earlier this year that called for slashing jobs by 36 percent.

First-half profit for SAIC slid 26.4 percent from a year earlier after it made provisions of 1.18 billion yuan (US$173 million) against possible losses on Ssangyong.


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