Ssangyong faces uncertain future

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."