HAAH CEO Duke Hale pivots to Korean auto import plan

“If we were successful in our acquisition of SsangYong globally, that obviously means we would have the [right to] the U.S. and Canada markets,” Hale said.

Hale’s new Delaware-based company, Cardinal One Motors, will take over HAAH’s yearlong interest in the court process to find SsangYong a new owner. Indian automaker Mahindra and Mahindra said last year that it wanted to sell its majority stake in Korea’s fourth-largest automaker after failing to improve its business prospects.

With no buyer coming forward for money-losing SSangYong, the automaker was put under court receivership, the Seoul Bankruptcy Court said in April. HAAH has been mentioned repeatedly in the Korean media as a possible savior for SsangYong but has also repeatedly missed court deadlines to file a rescue plan.

Hale, in his first comments on a SsangYong bid, said an investor group that he is advising intends to go after the automaker prior to the end-of-July deadline set by the Korean bankruptcy court. The Cardinal One investors will do so under the new legal entity given the demise of HAAH Automotive Holdings, he said.

“Cardinal One Motors has nothing to do with HAAH,” Hale said in an interview Wednesday. “It is a distinctly separate entity and it’s a new entity. And that entity will be in the process of submitting a letter of intent for the acquisition of SsangYong Motors.”

Hale said the SsangYong bid is likely to involve raising $250 million to $350 million, in addition to possible help from Korean financial institutions including the Korean Development Bank. At stake in Korea, Hale said, are about 4,500 jobs.

“We’re positioned in Korea, where maybe if we raise money, we get some more money that would flow into the company,” he said, without identifying where the additional money would come from.

“It’s going to take a significant amount of money and a significant amount of effort,” Hale said. “We did a lot of due diligence on this deal. We’ve had people and outside companies evaluating SsangYong since July of last year. This is not some casual interest. We’ve been involved for 12 months now.”

Great potential

Although SsangYong has been losing money, Hale said he sees great potential for the Korean brand, which is present in dozens of global markets but not in the U.S. and Canada. Unlike the difficult situation with Chinese auto brands, Korean vehicles don’t face tariffs because of its free-trade agreement with the U.S.

“You don’t have the big tariff problem,” Hale said in comparing the prospect of Korean imports to Chinese auto imports, which carry a 27.5 percent tariff. “You have great relations between Korea and the U.S. It’s a different ballgame. And Korean quality is seen by the American consumer as very good.”

SsangYong, however, has been troubled for many years and has been losing money, prompting Mahindra’s exit.

According to Reuters, SsangYong’s 2020 operating loss widened to 449 billion won ($401.76 million) from 282 billion won a year earlier. Revenue fell 19 percent to 3 trillion won.

Mahindra, which owned 75 percent of SsangYong as of the end of last year, bought SsangYong when the South Korean automaker was near bankruptcy in 2010 but has struggled to turn it around.

Skeptical dealer

Meanwhile, the fallout from HAAH’s failure is being felt by investing dealers.

Larry Battison, dealer principal of Battison Honda in Oklahoma City, said he was dismayed by the failure of Hale and HAAH to finalize the Chinese deal after telling prospective U.S. dealers that the plan with China’s Chery Automobile was steadily moving along.

Battison had paid a nonrefundable $300,000 deposit for two sales points for the Chinese vehicles to be sold under the Vantas and T-GO brands in the U.S. Battison said he was less upset about losing the money than being misled by overly optimistic updates.

The business plan also changed back and forth from importing the vehicles to assembling them in the U.S. Battison was a proponent of the “Made in America” plan before it was abandoned earlier this year.

“I’m just deeply disappointed,” Battison told Automotive News on Wednesday. “The whole time we were strung along about finding a plant to build cars or assemble kits in the United States and that they were looking for a parts distribution warehouse. But it was all talk and very little action.”

Battison said he doesn’t think dealers were ripped off by Hale and HAAH, but rather that the communication didn’t match reality. Prospective dealers were shown some vehicles, but they were Chinese versions and not U.S.-spec models. And then suddenly in May, key executives left HAAH and Hale downplayed the importance of their exit. But for Battison, the writing was on the wall.

“I don’t think it was fraud, but I think it was making some assumptions that were overly optimistic and leading the dealer body to think they were further along than they really were,” Battison said. “And if I’m wrong, I owe Duke Hale a big apology.”

Read More: HAAH CEO Duke Hale pivots to Korean auto import plan

2021-07-21 21:31:36

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