Kumho Tire narrowly avoids bankruptcy, sold to Chinese firm

blackwasp · 2nd April 2018, 12:17

South Korean tyre company Kumho Tire has narrowly avoided bankruptcy following the approval of the company's takeover by China's Qingdao Doublestar. The Kumho labour union approved the US$ 607 million deal that will give 45% stake in South Korea's No. 2 tyre company to the Chinese counterpart.

Until Friday, the union was opposed to any sale / takeover by Doublestar due to worries over salary cuts and sharing of proprietary technology. Both the South Korean finance minister and a deputy prime minister had said that the company could fall and face bankruptcy in case there was a shortage of funds and the deal fell through. Further, Kumho's debts were due on April 2, 2018 with no way to repay them till the union's approval late on March 30, 2018.

Had the deal fallen through, it was most likely that company assets would be liquidated and sold to raise money to cover the debts. This could have caused loss of employment of almost all the workers and brought an economic downturn in Gwangju, Kumho's home region. The government-backed Korea Development Bank is leading the creditors and will sign the basic acquisition agreement with Doublestar.

As part of the deal, the workers have agreed to forfeit 25% of their bonuses for the period of 2017-19, and have the wages frozen for the same period. The company’s Gwangju and Goksung Plants will increase their productivity by 4.5% while the workers will get 40 days annual leave, with half of it unpaid and the rest with a 50% pay cut.

Kumho Tire narrowly avoids bankruptcy, sold to Chinese firm-spare-tyre-kumho.jpg

Source - Business Korea

Link to the Team-BHP News

stanjohn123 · 2nd April 2018, 22:31

Kumho is a very good brand. Sad to see it in such state. Very poor marketing strategy has led to this I guess.

GTO · 3rd April 2018, 10:14

Quote:

Originally Posted by stanjohn123

Very poor marketing strategy has led to this I guess

Nothing to do with marketing strategy. Kumho was killed by the same disease that affected many component makers (closer home = Amtek Auto). Reckless expansion & taking on too much debt. Excessive debt is like cancer and can bury you, whether you are a multi-billion $ corporation or a middle-class family man.

SmartCat · 3rd April 2018, 10:35

The Business Korea article has 9 paragraphs, 4 of which mention workers, employees and union members. Workers union voting on business deal? Never a good idea. Looks like too much power & decision making is in their hands - instead of board members, management or shareholders. Workers union will always think short term (job guarantee, salary hikes, bonuses etc)

2nd April 2018, 12:17	#1
blackwasp Senior - BHPian Join Date: Apr 2015 Location: Navi Mumbai Posts: 2,974 Thanked: 26,325 Times View My Garage	Kumho Tire narrowly avoids bankruptcy, sold to Chinese firm South Korean tyre company Kumho Tire has narrowly avoided bankruptcy following the approval of the company's takeover by China's Qingdao Doublestar. The Kumho labour union approved the US$ 607 million deal that will give 45% stake in South Korea's No. 2 tyre company to the Chinese counterpart. Until Friday, the union was opposed to any sale / takeover by Doublestar due to worries over salary cuts and sharing of proprietary technology. Both the South Korean finance minister and a deputy prime minister had said that the company could fall and face bankruptcy in case there was a shortage of funds and the deal fell through. Further, Kumho's debts were due on April 2, 2018 with no way to repay them till the union's approval late on March 30, 2018. Had the deal fallen through, it was most likely that company assets would be liquidated and sold to raise money to cover the debts. This could have caused loss of employment of almost all the workers and brought an economic downturn in Gwangju, Kumho's home region. The government-backed Korea Development Bank is leading the creditors and will sign the basic acquisition agreement with Doublestar. As part of the deal, the workers have agreed to forfeit 25% of their bonuses for the period of 2017-19, and have the wages frozen for the same period. The company’s Gwangju and Goksung Plants will increase their productivity by 4.5% while the workers will get 40 days annual leave, with half of it unpaid and the rest with a 50% pay cut. Source - Business Korea Link to the Team-BHP News Last edited by blackwasp : 2nd April 2018 at 12:19.
	(7) Thanks

2nd April 2018, 22:31	#2
stanjohn123 Senior - BHPian Join Date: Oct 2008 Location: TN 75 Posts: 1,345 Thanked: 1,798 Times View My Garage	Re: Kumho Tire narrowly avoids bankruptcy, sold to Chinese firm Kumho is a very good brand. Sad to see it in such state. Very poor marketing strategy has led to this I guess.
	(1) Thanks

3rd April 2018, 10:35	#4
SmartCat Team-BHP Support Join Date: Jun 2007 Location: Bangalore Posts: 6,429 Thanked: 42,950 Times View My Garage	Re: Kumho Tire narrowly avoids bankruptcy, sold to Chinese firm The Business Korea article has 9 paragraphs, 4 of which mention workers, employees and union members. Workers union voting on business deal? Never a good idea. Looks like too much power & decision making is in their hands - instead of board members, management or shareholders. Workers union will always think short term (job guarantee, salary hikes, bonuses etc)
	(2) Thanks