Home > companies > Ssangyong Motor looking to report its first annual profit

Mumbai: Four years after Mahindra and Mahindra Ltd acquired the ailing Ssangyong Motor Co., the Korean company is looking at turning in the first annual profit, top officials of the company said in an interview. Mahindra acquired Ssangyong in November 2010.

The company is also looking at doubling its sales volume by 2016.

“We will be making the first annual profit this fiscal," said Yoo II Lee, president and chief executive officer at Ssangyong Motor. The company follows the calendar year for accounting purposes.

According to Pawan Goenka, chairman, Ssangyong Motor Co. and head of Mahindra’s automotive business, the company’s has benefited from higher sales which, in turn, came from the launch of refreshed and new models. The company closed 2013, with a unit sales of 146,000 units, up 22% from a year ago. This was led by a 30% growth in Korea where Ssangyong became the fourth largest auto maker, rising up a rank. The company hopes to sell 160,000 cars in 2014, an increase of 10%, and plans to double over a three-year period to 300,000 units by 2016. It is counting on significant growth in Korea, China and Russia.

“Lot of things have gone right for us," Goenka said, explaining that a weak won (the Korean currency) coupled with cost control measures helped. The company, however, will have to make some provisions because of a recent ruling by the Supreme Court of Korea asking all companies to include the bonus and some allowances as part of so-called “ordinary wages" which are used to calculate overtime pay. “This may take us into a negative territory. But operationally we are profitable," he said without offering any numbers because the auditing is currently underway.

Meanwhile, Mahindra and Ssangyong are working on the joint engine development programme to produce a family of six engines that will power all future Mahindra and Ssangyong model.

Korea’s sixth largest conglomerate, the Ssangyong group, decided to sell its debt-ridden car unit to the nation’s third largest industrial group, Daewoo, in December 1997 when South Korea was reeling under an unprecedented corporate debt crisis.

Two years later, Daewoo collapsed under the weight of $75.5 billion in debt, making way for creditor banks to wrest control of Ssangyong Motor as part of a rehabilitation plan.

In 2004, China’s SAIC Motor Corp. Ltd bought 48.9% of the car unit from creditors for 590.9 billion won. Five years later, SAIC decided to give up on the loss-making car maker. Ssangyong Motor filed for court receivership in 2009.

Court receivership is a process in which an institution or enterprise is held by a receiver, armed with the custodial responsibility for the property, including tangible and intangible assets and rights.

The receiver, Yoo II Lee, played a key role in M&M’s acquisition of Ssangyong Motor. He is now president and chief executive officer of Mahindra Ssangyong. A meeting with Anand Mahindra, vice-chairman and managing director of the Indian firm, convinced Lee that M&M would be different from Ssangyong’s past owners.

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