Leadership risk weighs on Hankook Tire

Hankook & Company Chairman Cho Hyun-bum / Courtesy of Hankook & Company

Hankook & Company, the holding firm of Korea’s largest tire maker Hankook Tire, faces increasing risks to its effective decision-making — particularly in its overseas business — following the imprisonment of Chairman Cho Hyun-bum.

Cho was sentenced to three years in prison and taken into custody on Thursday on charges of embezzlement and breach of trust amounting to 20 billion won ($14.5 million).

The leadership vacuum comes at a critical juncture, as Hankook Tire faces mounting business risks in the United States, which has imposed a 25-percent tariff on tire and auto part imports — a protectionist measure that poses a significant threat to the company.

Under Cho's leadership, the tire company decided to double its production capacity in Tennessee to mitigate the impact of U.S. tariffs.

However, his absence is expected to stall key decision-making at Hankook Tire, making it more difficult for the company to proactively deal with external risk factors.

A spokesperson at Hankook & Company said the group will take legal steps.

“We consider taking legal actions or lodging an appeal by cautiously negotiating details with our legal team,” it official said.

Cho’s imprisonment also puts the brakes on Hanon Systems’ swift earnings recovery. The automotive thermal and energy management solutions provider was acquired by Hankook & Company in January.

Hankook & Company headquarters in Pangyo, Gyeonggi Province / Courtesy of Hankook & Company

Cho has since focused on improving the firm’s profitability amid deepening global competition. However, the company reported a 68.5 percent drop in operating profit in the first quarter compared to the same period last year.

Industry officials said the leadership void clouds the outlook for Hankook & Company’s future ties with its partners.

“Cho maintains close ties with business moguls here and abroad, so his absence will block the firm from clinching any timely partnerships with carmakers or other tech firms,” an official from the auto industry said.

Last year, Cho was seen enjoying a motorsport event in Yongin, Gyeonggi Province, along with Hyundai Motor Group Executive Chair Chung Euisun and Samsung Electronics Chairman Lee Jae-yong.

On top of that, the absence of the de facto leader of the company will also prevent the timely signing of major M&A deals, according to the official.

“Even if paid CEOs can also make decisions and deal with risks, the role of chairman is much more important when the company is exposed to an unexpected external shock, such as the U.S. tariffs.

Cho is the largest shareholder of Hankook & Company, with a stake of 42.03 percent in the firm.

The leadership vacuum will also make it difficult for Hankook & Company to preemptively design and revise its overall business strategy amid the global auto industry’s transition into electric vehicles.

“Even if the firm enters an emergency mode, it will be exposed to a higher risk at this period of a volatile business environment here and abroad,” the official said.