S Korea Ssangyong Motor To Switch To Own Delphi Based Diesel Engine

SEOUL -September 6, 2002 - Dow Jones reported that South Korea's Ssangyong Motor Co. announced Friday that it plans to use its own diesel engine - now being developed - in its cars starting 2004.

The new engines, based on the technology of U.S.-based Delphi Corp., will replace the current engines made by the Mercedes-Benz unit of DaimlerChrysler AG (G.DMC).

The move to switch to new engines is to meet stricter emission regulations in South Korea, said the company.

The South Korean government plans to implement, in 2005, stricter emission rules for diesel engine vehicles to ease air pollution, said Kim Tae-Sik, a Ministry of Environment official. The details of new regulations have yet to be worked out, Kim said.

All but one Ssangyong car models are sports utility vehicle models, which come equipped with diesel engines. Ssangyong has been using Mercedes-Benz's engines for its SUVs since 1993, said Hee-Mok Ahn, a Ssangyong Motor spokesman.

Until it switches over to its own engines, Ssangyong will continue to buy from Mercedez-Benz. But Ssangyong's obligation to make loyalty payments to DaimlerChrysler will end at the end of this year, Ahn said.

In another development Friday, the company's creditors said they have failed to find a buyer in their recent attempts to sell the company, and will "conduct a new round of consulting" for its restructuring.

The creditors still prefer to sell the company to a foreign buyer, said an official at Chohung Bank , a creditor bank.

Ssangyong Motor, former affiliate of bankrupt Daewoo Motor Co. , had been placed under a creditor-led debt workout program in August 1999 along with 10 other now-defunct Daewoo Group affiliates.

At end-March 2002, Ssangyong Motor's liabilities totaled KRW1.813 trillion, while its interest-bearing debt was at KRW868.5 billion.

But, helped by a temporary tax cut on car purchase, Ssangyong Motor posted the first half net profit of KRW120.4 billion, a sharp jump from KRW14.5 billion a year ago. Sales surged 53% on year to KRW1.696 trillion.