Kumho Tire – can a Doublestar acquisition still take place?

The Korea Development Bank (KDB) has denied finalising the sale of a 42.01 per cent share in Kumho Tire to Qingdao Doublestar Tire, but that’s exactly what we’d expect it to do until all the ‘i’s are dotted and ‘t’s crossed. Negotiations between Kumho Tire’s creditors and Doublestar recently recommenced, however The Korea Herald has quoted a KDB official as stating “nothing has been finalised.”

This comment was made in regard to recent reports that suggest Doublestar’s latest offer of KRW 700 billion (£464.5 million), along with a three year employment guarantee for workers, has found favour with the KDB and other creditors. But as we’ve already seen, the search to find a new owner for Kumho Tire is less than straightforward, and two major complications stand in the way of a deal being reached.

The first of these involves the small proportion of Kumho tyres (Business Korea gives the figure as 0.2 per cent of output) made to meet military demand; Kumho Tire produces tyres for the Republic of Korea Air Force’s F-16 fighter and T-50 trainer jet. Supply of these tyres to the military means permission from South Korea’s Ministry of Trade, Industry and Energy as well as the Defense Acquisition Program Administration (DAPA) must be obtained before the Kumho Tire shareholding can be sold to a foreign company. When making its decision, the DAPA is expected to take public opposition to Kumho Tire’s sale to a Chinese firm into account, and also the precedent such a sale would represent.

A second hurdle to overcome is potential union opposition to a sale to Doublestar, and this may be where the agreement falls flat on its face again. As Business Korea explains, Kumho Tire’s creditors look likely to withdraw their agreed grace period on the tyre maker’s debts if they are unable to sign a memorandum of understanding (MoU) on management normalisation with Kumho Tire by 26 February. A precondition for this MoU is Kumho Tire’s negotiation of a self-rescue plan with the labour union that represents its workforce. No such plan has been agreed between the two parties, and therefore the creditors can’t (or won’t) sign an MoU with Kumho Tire. Should the MoU not be signed by 26 February and outstanding debts paid, the creditors may take Kumho Tire into receivership.

Comments closed

We see you are visiting us from China.

If you would like the latest news from the Chinese tyre industry in Chinese, visit our partner site TyrepressChina.com. Or click below to continue on Tyrepress.