Row deepens over Kumho Tire's sale
Two of Kumho Tire’s union leaders stage a sit-in protest on a transmitting tower near the company's factory in Gwangsan-gu, Gwangju, Friday. / Yonhap
By Nam Hyun-woo
The row between creditors and the union of Kumho Tire is deepening, as the former once again selecting China’s Doublestar as a potential buyer of the domestic tire maker.
The union said Sunday that it had scrapped a tentative self-rescue plan, which it had agreed to with management, and will launch an “all-out strike” March 23 to protest the creditor’s plan to sell the company to the Chinese tire maker.
Union leaders have been staging a sit-in protest on a transmitting tower in Gwangju, where the company is located, since Friday, saying they will continue the protest until the main creditor, the Korea Development Bank (KDB), withdraws the Doublestar plan.
The protest came after the KDB announced Friday that it was in talks with Doublestar to hand over more than a 45 percent stake to the Chinese firm for 646.3 billion won ($596.77 million).
KDB Senior Vice President Lee Dai-hyun said: “The talks are ongoing under the conditions that Doublestar retains the current number of employees for three years and creditors lend 200 billion won to Kumho Tire for facility investment.”
“The Doublestar option is the best to normalize Kumho Tire’s business and prevent further losses for creditors,” Lee said.
Kumho Tire will issue a rights offering worth 646.3 billion won, each share priced at 5,000 won. This will make Doublestar the largest stakeholder of Kumho Tire with 45 percent, while creditors’ share will decline to 23.1 percent from 42.1 percent.
This is not the first time that Doublestar has attempted to buy Kumho Tire. In January last year, the creditors selected it as the preferred bidder to buy the cash-strapped tire maker, but saw the deal collapse eight months later as the Qingdao-based company demanded a lower sale price.
Despite that attempt, the KDB again resorted to Doublestar, saying there was no other option.
The KDB said Kumho Tire’s liquidation value is an estimated 1 trillion won, while its going-concern value remained at 460 billion won at the end of last year.
The bank cited the company’s weakened cost competitiveness, the poor performance of overseas affiliates, and inefficiency in production and management as reasons for the company to post losses for three consecutive years.
“There were several investors who showed interest in Kumho Tire’s overseas factories, but there were no global tire makers interested in the whole company other than Doublestar,” Lee said.
Also, the KDB said the union’s strong influence on the company has made Kumho Tire unattractive, saying personnel costs are relatively high compared to productivity.
The union is vehemently opposed to a Doublestar takeover, saying there would be a potential leak of Kumho Tire’s core technologies and knowhow, massive layoffs and a negative impact on the economy of Gwangju.
“The plan is only aimed at minimizing creditors’ loss and does not count the chaos it will create to employment in Gwangju,” it said.
The union said the acquisition could become a repeat of the sale of Ssangyong Motor to China’s Shanghai Automotive Industry in 2004. The sale was criticized as the Chinese company took over Ssangyong’s core technologies while not investing enough to strengthen the Korean carmaker's competitiveness.
Another reason against Kumho Tire’s sale is the fact that it is the only company producing tires for Korea’s warplanes including the F-16, F4 and F5, and the T-50 advanced trainer.
If Doublestar is to buy Kumho Tire, it must apply for a government license listing it as a defense company.