Korean Light-Truck Maker Showing New Vitality
Executive Summary
Analysts believe Ssangyong’s outlook is positive as long as harmony prevails among workers and Mahindra continues to nurture the revived company. But it still faces a long road to renewed profitability.
Korean light-truck maker Ssangyong, deserted by its majority shareholder SAIC Motor of China four years ago and left in bankruptcy and labor turmoil, now is outpacing all other Korean auto makers with robust monthly sales gains.
Security analysts are impressed how well Ssangyong has forged ahead under the leadership of its new corporate parent Mahindra & Mahindra of India.
Ssangyong appears on track to hit sales targets equal to its best years before the unfortunate SAIC experience and volatile 3-month labor strike in 2009 that made headlines around the world.
Many analysts believe the auto maker’s long-term outlook is positive as long as harmony prevails among its workforce and Mahindra continues to nurture the revived company. However, Ssangyong still has a ways to go before it can be restored to profitability.
Last month, the auto maker signed a strike-free labor agreement with its union for the fourth year in a row. Days later, it reported its best-ever July sales results, up 28.5% from year-ago to 12,336 units. Through June, deliveries climbed 19% to 81,996.
July marked the fourth consecutive month of growth for Ssangyong, which far exceeded the combined modest gains of its four larger competitors – Hyundai, Kia, GM Korea and Renault- Samsung.
Ssangyong has sold more than 12,000 vehicles in each of the past four months, putting it on track to achieve its 2013 target of 150,000 units, up from 120,717 in 2012.
Ssangyong’s domestic sales surged 39% in July to 5,768 units against a market that rose only 3.5%. The strong performance presaged the much-awaited launch of the ’14 Korando C, an upgraded version of the popular SUV that debuted in 2010 and was designed by ItalDesign Giugiaro in Italy. The new model was unveiled this week.
A spokesman tells WardsAuto Ssangyong is aiming to sell 24,000 units of the new Korando C through the end of the year. Of those, 9,000 will be available for the domestic market and 15,000 exported, mostly to Russia.
Ssangyong refers to the 5-seater as a ULV (urban leisure vehicle). The side profile is not much different from the model it replaces, but the front has been completely revised.
New are a black grille, projector headlamps with light-emitting-diode running lights and an air intake integrated into the massive front bumper. The rear taillamps each form a “C.”
The interior receives considerable upgrading from previous models, with a ventilated driver seat, soft instrument panel and 7-in. (18-cm) touchscreen multimedia system with 3-D GPS maps and a Harman Kardon sound system.
An optional red leather interior is available. When ordered, sporty red trim is added to the exterior door handles and other body points.
The 2.0L diesel Ssangyong developed and produces at its Changwon engine plant has been upgraded to improve fuel economy about 8%. It develops up to 181 hp, depending on the tuning selected. Noise, vibration and harshness also have been improved, the spokesman says.
The diesel mill can be ordered with a 6-speed manual or fully automatic transmission, which features economy and full-power modes.
Ssangyong is looking for sales of the SUV to help it fully utilize available production capacity at its Pyongtaek assembly plant, where much of the original equipment was severely damaged during the prolonged strike in 2009.
The plant’s original capacity was 240,000 vehicles annually, but fewer than 200,000 units currently are being produced. The auto maker is hoping to reach full capacity in two to three years.
However, the infusion of 80 billion won ($71.9 million) by Mahindra in May, mostly for development of a new small SUV that will go on sale in early 2015, has been a game-changer, some analysts believe, as it increases the parent’s stake to 72.85%.
It also brings to 1.2 trillion won ($1.08 billion) the amount invested by Mahindra since its original investment of 522.5 billion won ($470 million) to acquire 69.3% of Ssangyong in 2011. Mahindra let ride for another year 95.4 billion won ($85.7 million) in bonds that were due to be paid by Ssangyong this year.
All of this favorable investment has given Ssangyong much-needed cash, improved its debt-to- equity ratio and made it easier for the auto maker to obtain additional financing from banks and other sources.
