Korea’s Ssangyong Enters Tivoli in Global Ute Game

Korean automaker Ssangyong’s first compact SUV, the Tivoli, could be exported to the U.S. in as little as two years, President Lee Yoo-il says.

Lee’s comments at the Jan. 13 launch event for the Tivoli follow disclosures that Ssangyong in June filed applications to register the Tivoli trademark in the U.S., along with one called the Luvent. The latter name reportedly is for a sedan and hatchback developed on the same platform as the Tivoli, which has been engineered and designed from the get-go to meet all U.S. crash tests and safety regulations.

Lee’s remarks also follow comments on Ssangyong’s U.S. sales objectives made in September by Ssangyong Chairman Pawan Goenka, who also is president and managing director of Mahindra & Mahindra automotive, agricultural and motorcycle operations, which owns a 73% stake in the company.

Goenka said at that time M&M had been conducting sales-feasibility studies for several months in preparation for the possible launch of Ssangyong vehicles in the U.S. If the board of directors approved a launch, it would take at least two years before sales could begin, he said.

Lee confirms one of the U.S. studies has been completed, and others are scheduled.

The Ssangyong president also says at the Jan. 13 event that the struggling automaker will not achieve breakeven for another two years because it was forced last year to roll employee bonus payments into its basic-wage calculation formula, which raised labor costs 11% to 13%.

Lee says that without the higher labor costs the company would have achieved breakeven and turnaround in 2013 or 2014. In 2013 Ssangyong had to set aside 15 billion won ($13.9 million) from operating profits in anticipation of having to rework its wage formula to include scheduled bonuses.

Ssangyong became the second automaker in Korea to agree to the basic-wage restructuring demands of the Korea Metal Workers Union in wage negotiations last year, rather than risk partial strikes and downtime. The first to concede was GM Korea, followed by Hyundai and Kia. The union at Renault Samsung, having won its first raise in two years, agreed to postpone the wage-reformulation matter.

With new sales volumes expected of the Tivoli, Lee says, Ssangyong should become profitable within two to three years despite the new wage formula’s squeeze on profits.

Goenka says Ssangyong has invested 700 billion won ($648 million) in plant improvements and product development since M&M acquired majority interest in the company in March 2011.

Half of that total has gone toward developing the Tivoli, which Lee calls a cornerstone on which the company will become a global SUV force.

Nothing can change the fortunes of an automotive company faster than the launch of a successful new product, Goenka notes.

The platform is expected to eventually achieve sales of 100,000 units per year, with the 2015 sales target for the Tivoli set at 38,500. This should help hike Ssangyong’s 2015 global sales about 12% to 160,000 units, Lee estimates.

Of the 2015 goal, some 84,000 vehicles would be sold domestically, a rise of about 14% in a market that is predicted to be relatively flat.

The company says reduced sales in Ukraine and Russia primarily accounted for a 3.2% drop in global sales in 2014, to 141,047 vehicles.

Russia was “the Achilles heel” that badly wounded Ssangyong’s 2014 performance, Mahindra Group Chairman Anand Mahindra, also chairman and managing director of M&M, told reporters after the Tivoli launch event.

Of Ssangyong’s 2014 sales, domestic deliveries rose 7% to 69,036 units, outperforming the local market, while exports, including CKD shipments, were down 11.8% to 72,011.

Lee says 1 trillion won ($925 million) will be invested in product development over the next three years, and one new vehicle will debut in each of those years, covering all three B, C and D classes.

Anand Mahindra says the Tivoli illustrates that M&M did not merely make a portfolio investment in Ssangyong four years ago, but is a long-term partner that will do whatever it can to help Ssangyong reach its global targets.

He says his personal goals are securing and ensuring the well-being of Ssangyong’s roughly 4,500 employees, and seeing that the company becomes a strong and self-supporting global producer of SUVs.

Smokestack Climbers Reminder of Labor Friction

While Mahindra’s remarks generally were perceived as upbeat and good news for Ssangyong, its employees, suppliers, dealers and South Korea in general, some former Ssangyong workers were devastated by what the chairman had to say about their futures.

The group comprises 152 KMWU unionists who have been demonstrating and pleading for reinstatement to the Ssanyong labor force. The company discharged them following a fiery 77-day strike and sit-in that crippled Ssangyong’s Pyongtaek plant in the summer of 2009.

That happened when Ssangyong was still majority-owned by China’s Shanghai Automotive Industry Corp. It was one of the worst labor-management blowups in the history of Korea’s automotive industry.

The 152 dismissed workers hoped Mahindra would announce some special provision for them when he visited Korea. The executive said publicly that while he sympathized with any former workers suffering hardships he could not quickly reinstate them without jeopardizing the well-being of the company and its employees, and the thousands of other employees of suppliers and dealers who support the company.

He offered assurances that after the Tivoli has succeeded, the company regains profitability and sales volumes require additional recruiting, the former workers would get a chance to become re-employed. But Ssangyong president Lee says recovery is at least some two years away.

Over the past three weeks 30 to 50 of the former workers have demonstrated at various locations in Seoul, including outside the Seoul Press Center a few blocks from City Hall. They have crawled along sidewalks on their stomachs, while supporters and others chanted and held up placards, pleading to get their jobs back.

Their last such crawling demonstration, held Jan. 12, ended when police blocked them from moving to a public area near the Blue House, the residence and administrative headquarters of Korea’s President Park Geun-hye. The demonstrators lay on the frozen sidewalk throughout the night, but walked away silently next morning.

Hurt most of all by Mahindra’s comments may have been two dismissed employees who have been keeping an aerial vigil atop one of the 240-ft. (73-m) -high twin smokestacks that are a landmark for Ssangyong’s Pyeongtaek plant.

The two former workers are Lee Chang-geun, policy and planning chief-KMWU, and Kim Jeong-wook, secretary general of the union’s Ssangyong Branch. They climbed the smokestack Dec. 13, after the Supreme Court of Korea annulled a Seoul appeals court judgment that had ruled the dismissal of workers in 2009 had not been justified by the court’s examination of Ssangyong’s actual financial records. The Seoul court said Ssangyong had not exhausted other remedies to ease its problems and releasing the workers had not been necessary.

There was dancing in the streets for a few days, and demands for immediate reinstatement of the workers, but on appeal by Ssangyong the Supreme Court negated the lower court's ruling.

The two aerial protesters don’t have two years to wait to be instated to their jobs, but they continue to vow they will not come down unless the 152 dismissed workers are reinstated.

Ssangyong, meanwhile, has filed a lawsuit against the union officials, asking the Suwon District Court to fine each of them 1 million won ($923) a day for interfering with plant operations.

The company says their presence distracts employees from doing their work and creates a bad image that can interfere with its sales and marketing efforts.

The company also has filed a police complaint alleging they illegally entered company property by cutting their way through a wire fence.

Activists in several locations in Seoul and other Korean cities on Jan. 11 held “chimney day” in which individuals held up signs in support of the two former Ssangyong workers.

Mahindra says M&M has empowered Ssangyong President Lee to make local decisions regarding the dismissed workers. He says it would be irresponsible for him personally to give in to short-term pressures from the former workers and their supporters.