A court overseeing bankruptcy protection for South Korean automaker Ssangyong Motor approved the company's rehabilitation plan Thursday, clearing a key hurdle in the debt-ridden SUV manufacturer's path toward revival.
Ssangyong Motor Co. went into court-approved bankruptcy protection in February amid falling sales and mounting red ink. Fears of its liquidation had spiked last summer as hundreds of workers seized its main assembly line for more than two months to oppose mass layoffs.
Ssangyong is majority-owned by Shanghai Automotive Industry Corp., or SAIC, one of China's largest vehicle manufacturers, though it lost management control amid the bankruptcy protection process.
Ssangyong mostly manufactures light SUVs, but also makes a luxury sedan, the Chairman.
In September, the automaker submitted a corporate rehabilitation plan to the court that centers on how to repay its debt worth about 1.2 trillion won ($1 billion). It also included a capital reduction plan that will cut SAIC's stake in Ssangyong to 11.3 percent from the current 51.3 percent by next month.
Some creditors have so far rejected the plan over Ssangyong's proposed debt repayment terms.
But the Seoul Central District Court overruled the objections in giving approval on Thursday, saying the plan has met all legal requirements and is believed to be able to protect creditor rights.
Ssangyong hailed the decision as "laying the groundwork for normalizing" operations.
The company said in a statement that it will "make utmost efforts to be reborn as a corporation with long-term survival capabilities by making sure to push ahead with the revival plan."
It said it will try to return to profit within three years and increase sales threefold during that period.
Ssangyong, South Korea's fifth-largest automaker, is far smaller than domestic rivals Hyundai Motor and Kia Motors Corp. Its troubles have drawn attention, however, as they came amid turmoil in the world auto industry sparked by the global economic downturn.
Ssangyong shares rose 7.4 percent to finish Thursday at 4,060 won. The court's announcement came less than an hour before the stock market closed.
Associated Press writers Jae-soon Chang and Kelly Olsen contributed to this report.