HAAH files for bankruptcy
By Kim Hyun-bin, Kim Yoo-chul
The exacerbating problems at General Motors Korea (GM Korea) and SsangYong Motors, alongside the European Union delaying approval of Hyundai Heavy’s proposed acquisition of Daewoo Shipbuilding and Marine Engineering (DSME), are testing the Korea Development Bank’s (KDB) managerial skills.
The state-owned lender has had a central role in all of these issues since their beginning. It is the top stakeholder in the ailing SsangYong and second-largest shareholder in GM Korea. Additionally, the bank has been tasked by Cheong Wa Dae to navigate and specify plans on how to revive the country’s shipbuilding and shipping industries.
But how to manage the uncertainty surrounding these issues raises many questions. Despite an extension of relief efforts, SsangYong is having trouble finding a new owner, and GM Korea is still dealing with very low production rates and poor sales. The EU is concerned about the Hyundai Heavy-DSME deal as it could possibly give Hyundai Heavy a monopoly in the building of LNG and LPG carriers, even as Cheong Wa Dae welcomes the acquisition in terms of its aim to be the central player in the global shipbuilding and shipping markets.
SsangYong Motor is stuck in limbo after favored acquisition candidate HAAH Automotive announced plans to file for bankruptcy. Now any hope for SsangYong lays squarely is in the hands of local buyers as the deadline to submit a letter of intent draws near. The spread of COVID-19, the U.S.-China conflict and increases in automotive tariffs are said to have put HAAH Automotive into financial distress.
In a recent interview with local press, HAAH Chairman Duke Hale said it was no longer possible to generate a profit in the vehicle manufacturing and component business, leaving him no choice but to file for bankruptcy. “SsangYong is looking for a buyer from among local candidates but it won’t be easy to fulfill the financial requirements,” an industry official said, Wednesday.
With regard to the GM Korea issue, its U.S. headquarters has reportedly asked the local affiliate’s union representatives to address labor-related concerns, threatening that repeated industrial action would make it impossible to allocate any further investment or new production to Korea. However, GM did agree on a rescue package worth $7.15 billion, including an input of $750 million from the KDB, in 2018, and under the “binding deal,” GM can’t exit its investment here for 10 years.
“The SsangYong and GM Korea issues are becoming political ahead of next year’s presidential election given that the main plants of both companies are located in provincial cities considered pro-government, and ruling party hotspots. The KDB is being asked to show leadership by handling these tough issues effectively,” an industry executive said.
In the case of the Hyundai Heavy-DSME deal, the $2 billion acquisition will make Hyundai Heavy the world’s top shipbuilder as if completed, the deal will produce a company with a 21 percent global share. The maritime ministry said Korea aims to achieve 70 trillion won in annual revenue by 2030 by heavily assisting the local shipping and shipbuilding industries.
“When it comes to the recently announced blueprint, from the government’s standpoint it’s necessary to receive approval from EU for the proposed Hyundai Heavy-DSME merger,” an official said. As a reference, the KDB is hoping a top-tier company will purchase its holdings in Hyundai Merchant Marine, which the state-lender recently exercised its right to convert 100 percent of the shipper’s convertible bonds into 60 million ordinary shares.