Tire Feud Shuts Down GM Daewoo
By Kim Hyun-cheol
Staff Reporter
A worsening rift with tire suppliers has paralyzed production lines of GM Daewoo, bringing operations to a complete halt. Hankook and Kumho, the two tire suppliers, refused to provide Korea's third largest carmaker with tires last week in the wake of a breakdown in negotiations regarding a hike in prices.
Both of GM Daewoo's Incheon plants stopped working Monday, forcing it to lose production of over 800 vehicles, the company said.
The two leading tire manufacturers notified the automotive company of a supply cut earlier this month. Both signed a deal for a price hike of about 5.5 percent in March, but requested an additional 12-percent last month ― a condition that GM Daewoo said it could not accept.
They have long-term contracts with the carmaker, and together account for 85 percent of the automaker's tire demands. This is the first time local tire makers have ever cut supplies to a carmaker.
``Right now there seems to be nothing we can do about it but wait and see. The biggest priority is restarting the plants' operations and we are still expecting them to resume supplies,'' a GM Daewoo official said on condition of anonymity. ``The whole company will be seriously hurt if this sabotage continues.''
Earlier, the automaker won a court injunction with a Seoul court last Thursday ordering the suppliers to resume supplying tires to the company.
``(The two tire companies) stopped supplies to call for price increases, but they have no right to adjust prices according to the contract,'' presiding judge Lee Dong-myung of the Seoul Central District Court said in the ruling.
The two companies, however, are set to keep the fight going.
``We are currently seeking advice on the case, and will take action accordingly,'' a Hankook Tire manager said, making it clear it plans to continue to pressure the automaker.
An anonymous insider, however, added it is still willing to resume business once GM Daewoo complies with its call for further negotiations.
The two tire manufacturers said the initial deal did not take into account the recent surge in commodity prices, calling GM high-handed.
``Crude rubber prices have increased more than 50 percent since the March deal,'' the manager said.
``We made the same requests for contract revision to all local carmakers and are currently under negotiations with all the others. Only GM Daewoo is brushing it off completely.''
GM Daewoo hinted at a possible collusion between the two companies saying the supply-cut notice came the same date as the requested price increase, however, the tire makers denied the allegation.
``We have no idea about that,'' said the manager.