Ssangyong revs up for growth drive Four years ago, as South Korean carmaker Ssangyong Motor teetered on the brink of insolvency, a court asked Lee Yoo-il - a former top executive at rival Hyundai - to take charge. Mr Lee spent 10 days agonising over whether to take on the role of joint administrator at the jeep and SUV maker, which had suffered falling sales of its increasingly outdated models. "I spoke to my friends, and former colleagues from Hyundai Motor, and they said to try it," recalls Mr Lee, now Ssangyong's chief executive. The worst scenario was bankruptcy - but the company was already bankrupt. Now, with several former Hyundai colleagues in senior positions, Mr Lee is focusing not on survival but on growth in the thriving global market for large passenger vehicles - nibbling at Hyundai's grip on the domestic market and aiming for a 250 per cent sales increase, from a low base, in China next year. In the second quarter, Ssangyong recorded its first quarterly net profit for six years, and it expects to finish this year in the black for the first time since 2007. It now holds 6 per cent of the overall Korean market, compared with nearly 70 per cent for Hyundai and its affiliate Kia, and sells 16 per cent of all SUVs sold in the country. Ssangyong's return to health, under Indian parent Mahindra & Mahindra, is an unusual example of a successful foreign acquisition in South Korea, where takeovers by companies including General Motors and Standard Chartered have been hampered by volatile labour relations. Unlike previous owner Shanghai Automotive Industry Corporation - which later denied claims by Ssangyong of intellectual property theft - Mahindra has invested heavily since taking a majority stake in Ssangyong in 2011, earmarking $900m for product development over the next four years. This has given Ssangyong the resources to develop a new fleet of large passenger vehicles that has helped to restore the company's battered reputation at home. Ssangyong sold 15,358 vehicles in South Korea in the third quarter of this year, a 55 per cent rise from two years earlier. But the export market already accounts for 56 per cent of Ssangyong's sales, and the company is targeting big increases in sales to emerging markets including Russia, China and Latin America where an affluent upper-middle class and poor road quality results in a strong market for SUVs. "This year we'll sell about 7,000-8,000 cars in China, and next year our distributor has committed to 20,000," Mr Lee says. The SUV market is also buoyant in the US, where the burgeoning shale gas industry has set the country on course to becoming nearly self-sufficient in oil products, encouraging demand for fuel-hungry vehicles, and Ssangyong intends to enter that market within the next few years. It will do so under a new name, Mr Lee confirms for the first time: the Ssangyong brand will be abandoned within the next two years in an effort to "exit from the bad reputation" that clings to it. Ssangyong is fortunate to find itself a niche player in one of the fastest growing parts of the automotive sector: global SUV sales are set to increase by an annual 6 per cent to reach $414bn by 2017, estimates the consultancy Lucintel. But growing demand for Ssangyong's vehicles has been driven largely by a strategy of undercutting rivals on price, notes Angela Hong, an analyst at Nomura - a business model that means margins will remain slim. And while it is working to develop more parts in-house, Ssangyong's small production capacity means it has none of the economies of scale enjoyed by larger groups including Hyundai and Kia. Yet while those two domestic rivals, as well as the South Korean subsidiaries of GM and Renault, have struggled with a recent succession of debilitating labour strikes, Ssangyong has gone the past four years without industrial action in spite of an exceptionally ugly labour dispute even by the standards of the Korean automotive sector. Mr Lee regards his culling of excess manpower as one of the keys to Ssangyong's turnround: the workforce now stands at 4,500, down from 7,400 when he joined. But his restructuring efforts prompted a wildcat strike that shut down production for three months, after which Ssangyong promised to try to rehire laid-off workers when business conditions improved - a commitment that has cast a shadow over the subsequent turnround. While it has taken 450 of the former employees back on, critics accuse Ssangyong of moving too slowly, and domestic media gave heavy publicity to a spate of suicides among the redundant workers over the past four years. Nonetheless, staff morale has improved under the new management, says a spokesman for Ssangyong's union, adding that the company's decision to be more open with its staff has helped to offset frustration with the slow pace of pay increases. "Before I came here, I was not interested in Ssangyong," says Mr Lee. But the company has been changed. The credibility has been growing.