SsangYong Motor's annual financial report was rejected by its external auditor due to its heavy debt, the cash-strapped automaker said Tuesday.

SsangYong Motor, the South Korean unit of Indian carmaker Mahindra & Mahindra, said in a regulatory briefing that Samjong KPMG gave a disclaimer of opinion for its 2020 financial report, questioning its ability to continue its business.

The SUV-focused automaker logged 449.4 billion won ($398 million) in operating losses last year, increasing its deficit from 281.9 billion won in 2019. Its sales dipped 18.6 percent on-year to 2.9 trillion won in 2020.

SsangYong's debt rate stood at 111.8 percent as the end of 2020.  

Trading of the automaker's shares on the main bourse KOSPI was suspended after it filed for court receivership on Dec. 21 due to its failure to pay debt owed to its creditors. 

The Korea Exchange, the main bourse operator, said it will take steps to delist SsangYong shares with the auditor's opinion, noting the automaker can file an objection by April 13. 

Mahindra & Mahindra Ltd. is in the process of selling its controlling stake in the Korean unit but reportedly faced difficulty in narrowing terms of the deal with a potential buyer.

Mahindra acquired a 70 percent stake in SsangYong for 523 billion won in 2011 and now holds a 74.65 percent stake in the carmaker.

Earlier in the day, SsangYong's management and its labor union reached an agreement to cut half of the employees' wages in March and April, extending its pay cut in the last two months, the company said. (Yonhap)