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Daejeon plant fire adds to woes of Hankook Tire
Fire authorities inspect the site of fire at the manufacturing plant of Hankook Tire & Technology in Daejeon, Monday. Yonhap
By Lee Kyung-min
By Lee Kyung-min
A fire at a manufacturing plant of Hankook Tire & Technology, Korea's largest tire manufacturer, is adding to concerns about the firm's bleaker corporate outlook for the foreseeable future, according to market watchers, Monday.
The fire destroyed over 400,000 tires in Daejeon, Sunday, hospitalizing 11 people including rescue workers and firm employees being treated mostly for toxic smoke inhalation. It took about 10 hours to extinguish the fire, according to fire authorities.
The profit-denting incident is the latest in a series of developments unfavorable to the tire manufacturer in recent months.
Company CEO Cho Hyun-bum was arrested last week on charges of breach of trust and embezzlement of a combined 20 billion won ($15 million), fueling concerns that the firm under his leadership will see a slump in exports of its key products and delays in overseas investments.
Stalled labor talks pose another risk to Hankook, as indicated by months of standoffs between the firm management and 2,000 hardline workers affiliated with the Korean Confederation of Trade Unions (KCTU), one of the nation's two umbrella unions.
The non-hardline union members at Hankook agreed last October to a 5 percent increase in salary and 1 million won in bonuses, but KCTU members called this unacceptable considering inflation.
Last week's arrest renewed fears that the leadership vacuum will have a lasting impact this time, compared to one about three years ago when Cho stepped down as CEO in June 2020 over previous bribery and embezzlement charges.
The 2020 case led to a prison term suspended for four years following his arrest in November 2019.
Stakes are higher now, market watchers say, because Cho will not be able to avoid prison if he is found guilty on the latest charges, since he was released on a suspended sentence in 2020.
The prosecution initiated an investigation into Cho, prompted by a Fair Trade Commission (FTC) fine of 8 billion won against the firm for antitrust law violations.
Hankook bought, according to the antitrust agency findings, products made by an affiliate at a higher price and at a profit margin far higher than market rates.
The prosecution is looking into whether the higher-than-usual increases in the affiliate's profit between February 2014 and December 2017 benefited Cho's family.
Cho is facing allegations that he used company funds to renovate his home and buy expensive cars.
Hankook Tire was unavailable for comment.