Utility vehicle major Mahindra and Mahindra’s South Korean subsidiary SsangYong Motor Corporation, which has been facing some labour isues, has decided to reinstate all the 455 unpaid leave workers as on March 1, 2013.

Part of the $15.9-billion Mahindra Group, SsangYong has said it will reinstate all its workers to alleviate suffering and increase the production volume.

Ssangyong Motor’s sales in December 2012 had touched 11,871 units, with domestic sales at 5,365, representing a 53.2 per cent growth over the same month the previous year.

Cumulative domestic sales recorded the highest increase of 23.4 per cent, posting the top growth in domestic sales among all automakers.

Beating the slowdown

Despite a sluggish global economy, Ssangyong’s cumulative sales in 2012 recorded 120,717 vehicles, including 47,700 vehicles in domestic sales and 73,017 in exports, with a year-on-year increase of 6.8 per cent.

Mahindra had invested a total of $463 million (KRW 522.5 billion) in March 2011, with $378 million (KRW 427.1 billion) in new stock, and $85 million (KRW 95.4 billion) in corporate bonds to acquire 70 per cent of the Ssangyong Motor shares. The South Korean company had filed for bankruptcy.

Pawan Goenka, Chairman, Ssangyong Motor Company and President, Automotive and Farm Equipment Sectors, M&M Ltd, said: “Mahindra has always believed in finding a solution to the issue of unpaid leave workers. I am pleased that the demand for Ssangyong vehicles has increased such that we are able to reinstate the unpaid leave workers”.

In a statement, he added that, “Mahindra acquired Ssangyong assuming that all the restructuring efforts done prior to the acquisition were fully compliant with the Korean legal and governance systems. Therefore, if the past restructuring is questioned and all the dismissed workers were to be taken back, it will make it difficult, if not impossible, to achieve the turnaround of the company”.

Stating that the turnaround of Ssangyong still needs significant investment in products and capacities, Goenka said it would need the full support of the government.

The company said Ssangyong Motor labour and management have been focusing on increasing production through sales expansion, since a turnaround of the company appears to be the only solution to the current situation.

Mahindra and Mahindra (M&M) has also decided to invest in the company in the first half of 2013, for the mid to long term, and advance its turnaround by building up its core competencies.

Market expansion

Even though Ssangyong Motor has not yet achieved a financial turnaround, the company said it has been improving its sales record every year since 2009.

The company is to focus on market expansion by entering new overseas markets and launching facelift models in 2013 to maintain the growth trend.

M&M has announced that it, along with the South Korean unit, will jointly invest about $900 million to develop three new vehicle platforms and six engines.

The company has specified that the investments are parallel to the $908 million it plans to spend on its own products over three years ending in 2014.

amritanair.ghaswalla@thehindu.co.in

(This article was published on January 14, 2013)
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