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China's SAIC seeking S.Korea support for Ssangyong
China's SAIC Motor Corp said it and South Korea's Ssangyong Motor were seeking support from the Korean government andbanks for Ssangyong in the wake of plunging sales and high rawmaterial costs.
SAIC, which owns 51 percent of Ssangyong, said the twocompanies were also discussing with union representatives howto cut labour costs at the Korean firm.
'At present SAIC and Ssangyong are actively seeking supportfrom the Korean government and banks,' SAIC said in a briefstatement.
SAIC did not elaborate on the nature of any support and didnot say whether it might provide fresh financial assistanceitself to Ssangyong, South Korea's fifth-largest automaker.
Carmakers from the United States to Britain and Europe havesought state support to help them survive the worst industrydownturn in decades. Earlier this month, the U.S. governmentagreed to a $17.4 billion emergency loan package for Detroit'sBig Three to stave off a potential bankruptcy.
Last week, an official at state-owned Korea DevelopmentBank (KDB) said the bank had urged SAIC to provide Ssangyongwith 120 billion won ($93 million) in cash in return for thetransfer of technology. KDB also called on SAIC to guarantee acombined 200 billion won worth of loans from two Chinese banksto Ssangyong.
The KDB official said his bank would be willing to consider extending new loans to Ssangyong, but only if SAIC firstgranted assistance to the Korean company.
Ssangyong was hit badly by the global market downturn. InNovember it sold 3,835 vehicles, down 63 percent from a yearearlier, while monthly sales by all South Korean auto makersfell 8.6 percent.
SAIC shares fell more than 2 percent in afternoon trade,underperforming the broader market, while Ssangyong was down0.5 percent. Ssangyong's shares have slumped more than 60percent in three months amid concern over its financial healthand a prolonged industry slump.
SHORT-TERM PAINKILLER
Ssangyong needed to sell at least 10,000 units a month to break even, said Song Sang-hoon, an auto analyst at KyoboSecurities.
'I think SAIC is worried that its support may be a short-term painkiller, not a fundamental medicine,' Song said.
But Chinese analysts said they expected a deal wouldeventually be worked out between SAIC and the Korean side tohelp the troubled automaker.
'SAIC certainly does not want Ssangyong to go under as itis China's first cross-border auto acquisition,' said ChenQiaoning, an analyst with ABN AMRO TEDA Fund Management.
SAIC, which owns 51 percent of Ssangyong, said the twocompanies were also discussing with union representatives howto cut labour costs at the Korean firm.
'At present SAIC and Ssangyong are actively seeking supportfrom the Korean government and banks,' SAIC said in a briefstatement.
SAIC did not elaborate on the nature of any support and didnot say whether it might provide fresh financial assistanceitself to Ssangyong, South Korea's fifth-largest automaker.
Carmakers from the United States to Britain and Europe havesought state support to help them survive the worst industrydownturn in decades. Earlier this month, the U.S. governmentagreed to a $17.4 billion emergency loan package for Detroit'sBig Three to stave off a potential bankruptcy.
Last week, an official at state-owned Korea DevelopmentBank (KDB) said the bank had urged SAIC to provide Ssangyongwith 120 billion won ($93 million) in cash in return for thetransfer of technology. KDB also called on SAIC to guarantee acombined 200 billion won worth of loans from two Chinese banksto Ssangyong.
The KDB official said his bank would be willing to consider extending new loans to Ssangyong, but only if SAIC firstgranted assistance to the Korean company.
Ssangyong was hit badly by the global market downturn. InNovember it sold 3,835 vehicles, down 63 percent from a yearearlier, while monthly sales by all South Korean auto makersfell 8.6 percent.
SAIC shares fell more than 2 percent in afternoon trade,underperforming the broader market, while Ssangyong was down0.5 percent. Ssangyong's shares have slumped more than 60percent in three months amid concern over its financial healthand a prolonged industry slump.
SHORT-TERM PAINKILLER
Ssangyong needed to sell at least 10,000 units a month to break even, said Song Sang-hoon, an auto analyst at KyoboSecurities.
'I think SAIC is worried that its support may be a short-term painkiller, not a fundamental medicine,' Song said.
But Chinese analysts said they expected a deal wouldeventually be worked out between SAIC and the Korean side tohelp the troubled automaker.
'SAIC certainly does not want Ssangyong to go under as itis China's first cross-border auto acquisition,' said ChenQiaoning, an analyst with ABN AMRO TEDA Fund Management.
