Ssangyong faces uncertain future

FOLLOWING hot on the heels of Kia's cash crisis comes news that Ssangyong -- South Korea's smallest carmaker -- may also be facing financial trouble.

For the past year Ssangyong -- which launched its four wheel drive Boxer here in June -- has been suggesting that Daimler Benz was interested in increasing its share of the ailing South Korean manufacturer to maintain investor confidence.

Daimler currently holds a 2.23 percent stake in Ssangyong and provides the company with its recently displaced 3.2-liter straight six and 2.3-liter four cylinder engines along with other technical assistance.

But despite claims by Ssangyong, the German car-maker continues to deny it is talking to the company about increasing its share.

According to Reuters, Lee Chong-kyu, Ssangyong Motor president, told reporters last Thursday the company was in discussions on a stake increase with Daimler-Benz.

Attending a ceremony to launch Ssangyong's luxury "Chairman" passenger car -- which is based on the old W124 Mercedes E-Class Lee said: "It's really hard to talk about the deal, which is still on-going."

His comments conflicted with a strong denial made on Wednesday by a spokesman for the German company.

"No negotiations are going on about increasing our stake," a Daimler-Benz spokesman said. "Definitely not."

Ssangyong Motor's debts have been estimated at more than 3 trillion won ($US3.3 billion).

Korea Stock Exchange officials on Thursday discussed whether to ask Ssangyong to formally clarify the matter for investors, but decided no clarification was needed, an exchange manager said.

"We decided to believe the information provided by our listed company," the manager said.

He said Ssangyong had informed the exchange in September it was in talks with Daimler-Benz about raising its stake and had said it would notify the exchange if the talks resulted in a change.

"We decided to take no action for the time being, but we will watch the situation," the exchange manager said.

Meanwhile, investors traded Ssangyong Motor stock at a whirlwind pace.

More than 1.2 million Ssangyong Motor shares changed hands on Thursday.

The stock closed off 120 won down to 5,460 ($US5.97), after reaching a high of 5,780 and a low of 5,300.

"The pattern of trading of Ssangyong Motor can only be described as peculiar," said Henry Morris, managing director of Coryo Securities.

The market has often traded more than one million Ssangyong Motor shares a day over the past six weeks, compared to South Korea's largest carmaker, Hyundai Motor Co, whose daily trading volume has averaged about 51,000 shares, he said.

Kang Hun Sok, auto analyst at ING Barings, said Ssangyong Motor has been traded as a speculative stock for the past several years.

"From an investor's point of view, it's important to realize that not a lot of institutional investors have been interested in this stock," Kang said.

He said he thought investors were putting too much emphasis on the possibility of Daimler-Benz increasing its stake in Ssangyong.

"What's in it for Daimler-Benz?" Kang said.

"At this stage, I don't think they would want to take over an ailing company."

James Son, auto analyst at SBC Warburg, said Ssangyong Motor could determine the future of the sixth-ranked Ssangyong Group.

"The destiny of Ssangyong Motor will have a great impact on that of the Ssangyong Group," Son said.

"If it can't attract capital from the outside, the whole Ssangyong Group might be in progressive trouble."