In the second half of this year domestic auto sales plunged to levels that haven't been seen since the Asian financial crisis of the late 1990s due to deteriorating consumer confidence. In November sales dropped by almost 30 percent compared to the same period last year.

And just this past week Korea's fourth largest automaker, Ssangyong Motor, announced that it will not be able to pay staff this month because it lost over W100 billion (US$1=W1,313) this year alone.

But the government cannot openly support the industry as the World Trade Organization prohibits a government directly bailing out a specific industry, citing that it could negatively impact the same industry in other WTO member states.

The Financial Services Commission and the Ministry of Knowledge Economy have rolled up their sleeves to come to the rescue not themselves but through the financial sector. The government plans to use the fund of the Small and Medium Business Administration and invest it into a fund co-managed by the Industrial Bank of Korea and Hyundai Motor to provide liquidity to the car industry.

By bailing out the struggling financing companies that act as an intermediary between buyer and seller the government hopes it will lead to more people being able to purchase vehicles in installment plans. And starting this past Friday the government reduced individual consumption taxes that come from purchasing cars by 30 percent which is expected to save consumers W250 billion annually.

Arirang News