"The board of directors decided to apply for a court receivership in order to cope with the current liquidity crisis and turn the company into an entity capable of a continuous growth," Ssangyong said in a statement.
"At the same time, we will work out measures to normalise the company and execute them strongly."
A company spokesman told the AFP news agency that the courts will now decide "whether the company should be kept afloat or be liquidated."
|Car sales around the world have slowed as a result of the economic downturn [EPA]
Ssangyong's labor union, which is opposed to restructuring efforts, voted earlier this week on a strike motion and is waiting the outcome of a board meeting before deciding whether to count the ballots that could lead to a strike.
News reports have said Ssangyong plans to cut more than 3,000 jobs, including half of some 5,200 assembly line workers.
Ssangyong's attempts to avoid bankruptcy is the latest gloomy news to come from a global car industry that has been hit hard by the economic downturn.
Earlier this week Japanese giant Toyota, the world's largest carmaker, said it would halt production at its Japanese plants for a total of 11 days as it looks to clear a backlog of unsold vehicles.
Other manufacturers have warned of mass lay-offs and put of launches of new models, while speculation is growing that some of the biggest brand names in the industry may not survive.
In its statement, Ssangyong also said it was facing a "serious liquidity crisis" attributed to the worldwide credit crunch and that losses were mounting in the current climate.
"The operating loss has been widening because of sharp falls in domestic sales and exports as well amid the global economic downturn," the statement said.
The state-run Korea Development Bank (KDB), Ssangyong's main creditor, said last month it would not consider new loans unless Shanghai Automotive first provided Ssangyong with $250 million of funding.
Ssangyong expects to post a net loss of more than $76 million for last year.