SsangYong Motor's headquarters in Pyeongtaek, Gyeonggi Province / Courtesy of SsangYong Motor

Edison's takeover deal falls through

By Baek Byung-yeul

Edison Motors' acquisition of SsangYong Motor has been scrapped, as SsangYong announced Monday that it has canceled the deal to sell its controlling stake to a consortium led by Edison.

SsangYong said that Edison, a local electric bus maker, was supposed to pay 274.3 billion won ($223.8 million) to acquire the debt-ridden SUV maker by March 25, but it has failed to do so.

Now, SsangYong is once again on the brink of liquidation and is expected to continue its ownerless management for the time being.

A company spokesman said that SsangYong will look for a new buyer, push for a quick resale and submit a new rehabilitation plan to the court.

"We believe that the conditions for the resale of the company have improved significantly compared to when the M&A process began in June 2021," the spokesman said. "We completed the development of our new model, the J100, and plan to release it in June. We also forged a strategic alliance with China's BYD so that we can release our U100 electric car in the second quarter of next year."

However, some experts say it is better for SsangYong to file for bankruptcy than to stay in business. The company's debt has surpassed 700 billion won, and hundreds of billions of won are expected to be needed annually for the company to normalize operations and pursue new businesses such as producing electric vehicles (EVs).

"After the deal with Edison broke down, SsangYong now has fewer options. The government also asked me for advice, but it is true that there is no proper way for the company to revive itself," said Kim Pil-soo, an automotive technology professor at Daelim University College.

"The methods SsangYong can choose are to file for bankruptcy, have the government nationalize the company or find a better owner. Among these options, it would be best to go bankrupt because the company has lost its competence in the car industry, which is transitioning to EVs. On the other hand, if SsangYong goes bankrupt, Korea's car industry ecosystem could be severely damaged."

There are views that the government may discuss ways to inject public funds into SsangYong to revive the debt-ridden firm.

But it seems difficult for the government to decide to use public funds again, given that it is now the second time for the carmaker to be under court receivership, after 2009, when SAIC Motor of China, which was the major stakeholder at that time, relinquished its control of the carmaker. After being put under court receivership, the company was acquired by India's Mahindra & Mahindra.

"It may be difficult for the government to provide more public support to SsangYong. Also, it would be a waste of taxpayers' money," the automotive technology professor said.

Given that President-elect Yoon Suk-yeol has emphasized his prioritization of the free market economy and believes in the market's capabilities to restructure companies by itself, chances are low that any more public funds will go into SsangYong.

Kim Dae-jong, a professor in the School of Business at Sejong University, said that the president-elect will be faced with making a difficult decision about SsangYong because the entire ecosystem of subcontracted vendors responsible for the car industry may be saddled with hardships if SsangYong ends up going bankrupt.

"Now, the issue of SsangYong has become a big headache for the new administration. It is highly likely to be a major concern for the incoming president. The larger problem is that there is no solution to this problem," the professor said.