SsangYong has announced it is terminating the contract with a consortium led by South Korean bus-maker Edison Motors, under which it agreed to buy the car maker for 304.8 billion won ($A330 million).

Edison has paid 10 per cent of the sum but failed to pay the remaining 274.3 billion won ($A300 million) by the deadline.

SsangYong said in a statement to the stock market that: “The contract was automatically cancelled as the Edison-led consortium did not pay the remainder for the acquisition five business days before the date of the creditors’ meeting (on April 1)”.

South Korean news agency Yonhap said SsangYong’s creditors were planning to discuss on April 1 whether to approve Edison’s debt payment plans if the remainder was paid fully.

The news agency added that in response to SsangYong’s cancellation of the deal, Edison Motors filed for an injunction to retain its position as the preferred bidder for SsangYong.

Edison will now ask the court to place the initial 10 per cent down payment under provisional attachment, it said.

The Edison consortium in January signed a final deal with SsangYong on the takeover following the court’s approval of the acquisition plan.

But Yonhap said Edison Motors had trouble raising funds because its key associate, Edison EV, had its own financial trouble with consecutive operating losses.

SsangYong’s creditors and labour union were opposing the acquisition as they objected to the low debt payment ratio in the rehabilitation plan.

Edison Motors had requested the court allow the creditors’ meeting to be postponed to May 23 or later to buy time for the takeover process.

Shares in Edison EV this week plunged by the daily limit of 30 per cent to end at 12,250 won ($A13.42). Trading in SsangYong shares has been suspended since December 21, 2020.

Edison said it aimed to establish a special-purpose company to raise from 800 billion won to 1 trillion won ($A880 million to $A1.1 billion) starting this year to invest in a stake of SsangYong through various means, including a rights issue, loans and bond issuance.

It said it expected the company to achieve a turnaround “within three to five years” and transform SsangYong into an EV-focused car-maker.

Meanwhile, SsangYong said in a statement that it is in a much better financial position than last year and that in light of the Edison issue, is hopeful that a new buyer will appear.

It said it has a new SUV model, the J100, now confirmed for production in June. Last year, the model was still under consideration.

It also said that its plans to transition to an EV company were in place after signing a strategic partnership with EV manufacturer BYD.

“We are now planning to launch an all-electric U100 model by the latter half of next year,” SsangYong said in a statement.

SsangYong’s relatively recent history includes its 2004 takeover by China-based SAIC Motor Corporation which bought a 51 per cent stake. It relinquished control in 2009 because of the global financial crisis.

In 2011, Mahindra acquired a 70 per cent stake in SsangYong for 523 billion won ($A570 million) and now holds a 74.65 per cent stake in the carmaker.

For the whole of 2021, SsangYong’s sales fell 22 per cent to 84,106 units from 107,324 a year earlier amid the pandemic and chip shortages.

J100 Concept

By Neil Dowling