Edison Motors will ask for a loan of some 700 billion to 800 billion won ($596 million-$681 million) from Korea Development Bank to acquire the troubled SsangYong Motor, its chief executive officer said Friday.
The electric bus maker-led consortium looks set to be chosen as the preferred bidder for the debt-ridden SsangYong, after a bankruptcy court eliminated its strong contender from the competition, citing doubts over its funding capability.
Holding an online press conference, Edison Motors founder and CEO Kang Young-kwon expressed confidence that the consortium led by his company will be able to channel the funding needed to buy SsangYong, the country’s longest-running auto brand. The state-run lender KDB is the main creditor of SsangYong.
“It is not a credit loan. It is a secured loan with SsangYong’s assets as collateral, so there is no reason for the KDB to reject it,” Kang said, adding that SsangYong Motor is valued at some 2 trillion won.
During a parliamentary audit session Tuesday, KDB Chairman Lee Dong-gull sounded cautious on the bank’s financial support, as it has not yet fully evaluated Edison Motors’ business proposal.
Edison Motors estimates the acquisition and post-acquisition revival program for SsangYong Motor to cost about 1.48 trillion won to 1.62 trillion won.
Of that money, the undertaking fund of 310 billion won and operation costs of up to 530 billion will be raised by the consortium through stock issuance or by attracting outside investments, Kang said.
“Even if the KDB rejects the loan request, we can take out secured loans from other banks, albeit with higher interest rates, or even from banks outside of Korea,” he added.
While SsangYong has focused its business on sport utility vehicles, the Edison Motors chief said he has plans to change SsangYong into a strong player in electric vehicles.
Kang also spoke of diversification of its product portfolio to include compact vehicles and sedans as well, if demand exists.
For the company to gain profit, he said the annual production volume should triple to some 300,000 vehicles which would include some 150,000 electric vehicles and 50,000 hybrid vehicles, Kang said.
“We will make electrified versions of all the existing SsangYong models by transforming Edison Motors’ unique EV systems to fit the forms of SsangYong,” Kang said, explaining that this method would cut costs and time.
Setting a goal to achieve a net profit of some 10 trillion won by 2030, Kang said he plans to reopen the second manufacturing line in SsangYong’s Pyeongtaek production plant in Gyeonggi Province, which is currently out of operation.
The first and third lines are in operation, so they can continue to produce the SUVs and other passenger vehicles, Kang said.
Edison Motors’ new production plant in Gunsan, North Jeolla Province, will be making midsized and large electric buses and trucks while, the headquarters plant in Hamyang, South Gyeongsang Province, will be in charge of developing and producing other mobility vehicles, such as personal air vehicles, electric yachts and ships and electric camping buses, Kang added.
During the press conference, the Edison Motors chief also stressed that he will not lay off SsangYong workers, saying it is not necessary.
“I am not trying to acquire SsangYong to become a chaebol or anything. If SsangYong goes bankrupt, some 60,000 to 100,000 workers, including all of those from partner companies, will lose their jobs,” Kang said.
“I don’t believe restructuring guarantees a return to profit or improvement in performance. I want to revive the company and create a good work environment for the employees.”
On Wednesday, SsangYong said it had recommended the Edison Motors consortium as the preferred bidder for the automaker to the Seoul Bankruptcy Court. Edison Motors’ consortium includes homegrown activist fund Korea Corporate Governance Improvement, Keystone Private Equity and electric vehicle component maker Semisysco.
By the end of this month, SsangYong and its lead manager the EY Hanyoung accounting firm will submit an official request to the court to approve Edison Motors as the preferred bidder, and then sign a memorandum of understanding with the electric bus maker for the acquisition deal, according to SsangYong Motor.
Before signing the final contract for acquisition, the Edison consortium will conduct a two-week due diligence on SsangYong.
The biggest supplier of electric buses to the city of Seoul, Edison Motors recorded sales of 80.9 billion won with an operating profit of 5.6 billion won in 2019.
By Jo He-rim (firstname.lastname@example.org