Kumho Tire union agrees to vote on sale plan

Kumho Tire Co.'s union said Friday it will hold a vote to decide whether to accept creditors' plan to sell the debt-ridden company to China's Qingdao Doublestar Co.

The move comes after the government urged the union to agree on creditors' planned sale of the tiremaker to Doublestar by the end of the day or face court receivership.

"We have not decided on when to cast a vote on the plan yet," a union spokesman said by phone.

Early this month, Kumho Tire's creditors led by the state-run Korea Development Bank announced that they aim to sell Kumho Tire to Doublestar as it is the "only option" to turn the debt-ridden tiremaker around. They asked Kumho Tire and its union to forge an agreement on the sale plan by March 30. 

(Yonhap)
But the union had strongly objected to such a move, arguing that the acquisition by Doublestar could lead to massive layoffs and the stealing of technologies, as was the case with SAIC Motor Corp.'s takeover of SsangYong Motor Co. more than a decade ago.

In a joint statement released Friday, Finance Minister Kim Dong-yeon and other ministers called on the union to accept the creditors' sale plan to avoid being placed under court receivership early next month.

"For Kumho Tire, it is the only possible option to attract a large investment (from Doublestar) and improve the tiremaker's deteriorating financial status for a turnaround. The company does not have any cash to pay the debt which will mature on Monday," the statement said.

Market watchers said on Monday, Kumho Tire faces maturing debt worth 27 billion won ($25 million), and it has a whopping 2.4 trillion won in debt owed to domestic financial institutions, according to the company.

Main creditor KDB and 1,500 office workers at Kumho Tire called on the union to decide whether to agree to the sale plan through a vote.

If the union vote leads to the acceptance of the sales plan, creditors will inject fresh funds of 200 billion won in Kumho Tire, while rolling over maturing debt and lowering interest rates for outstanding debt.

On the other hand, if the vote is rejected and Kumho Tire is placed under court receivership, the government warned, there will be no guarantees on job security for the company's 3,100 union workers. Policymakers added that fallout on the economy could be substantial as well.

Besides the government, the tiremaker's President and Chief Risk Officer Han Yong-sung told reporters after a shareholders meeting held earlier in the day that the company has finished preparations to file for a court receivership on Monday if no agreement is reached with the union.

As for the union's concerns of technology theft and layoffs following acquisition, government officials, including KDB Chairman Lee Dong-gull and Financial Services Commission Chairman Choi Jong-ku, vowed to take all possible measures to prevent theft and job cuts from happening.

In its proposal, Doublestar said it will invest 646.3 billion won in Kumho Tire's new shares, which will allow the Chinese tiremaker to become the biggest shareholder with a stake of 45 percent. The Chinese truck and bus tiremaker said it will guarantee job security for existing union workers for three years after taking control of management.

If the rights issue is successful, KDB-led creditors will collectively own a 23.1 percent stake in Kumho Tire.

In March last year, Doublestar signed an initial 955 billion won contract with the KDB-led creditors to buy a 42.01 percent stake in the Korean tiremaker.

The deal, however, was scrapped in September when creditors rejected Doublestar's demand to cut the purchase price by 16 percent to 800 billion won, citing deteriorating earnings.(Yonhap)

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