Half of SsangYong Motor Company's workers will go on unpaid leave for two years beginning next month as part of self-help measures as the debt-ridden automaker is striving to speed up its sales process, the company said on Monday.
The automaker has been under court receivership since April as its parent, Mahindra & Mahindra (M&M) failed to attract an investor amid the prolonged pandemic and worsening financial status.
Cut in Wages
Over half of SsangYong workers last week voted for the company's proposal of a two-year unpaid leave to half of its 4,800 employees, as well as cut in their wages and other welfare benefits to stay afloat with cost-reduction efforts.
The company also plans to sell further assets to raise funds and not to hire new employees over the next five years to streamline its structure, while the union promised to stage no strike for years to come, reports Yonhap news agency.
The South Korean auto firm is looking for a new majority investor as its parent company Mahindra and Mahindra has decided to pull out of the carmaker.
Talking to the media earlier this year, then M&M MD Pawan Goenka (since retired) said that the company is actively scouting for an investor to take majority stake in SsangYong to keep it going. The new investor would have the majority stake and M&M will have 30 per cent or less if the deal goes through.
SsangYong said the unpaid leave is a "reasonable" and "effective" way to cut labour costs and maintain employment without massive layoffs, hoping it will speed up the prolonged merger and acquisition (M&A) process.
"The restructuring plan provides the momentum for a successful M&A under favourable conditions," SsangYong said in a statement.
SsangYong said it will submit the rehabilitation plan to the Seoul Bankruptcy Court, which is expected to post a notice for an auction later this month.
Lee Dong-gull, Governor of the state-run Korea Development Bank (KDB), a main creditor of SsangYong, told reporters that it will decide on whether to give financial help to the carmaker if the rehabilitation plan is feasible.
The self-rescue measures that will force half of SsangYong's workers to go on unpaid leave were a "step forward," but are "insufficient," Lee told reporters.
The KDB will provide financial support to SsangYong if the carmaker attracts an investor with management capability, Lee said.
The SUV-focused automaker has scaled down the production due to a shortage of supplies and weak demand, and currently rolls out about 8,000 vehicles a month with a double shift system.
In December, SsangYong filed for court receivership after failing to obtain approval for the rollover of 165 billion won ($147 million) worth of loans from creditors.