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Creditors make move to settle Kumho dispute

July 08,2017
Creditors of the troubled Kumho Tire made yet another proposition on Friday, likely the final move to settle the ongoing dispute between Kumho Industrial, which owns the trademark rights to Kumho, and Doublestar, a Chinese tire-maker and the preferred bidder for Kumho Tire.

Creditors of the tire company, led by Korea Development Bank (KDB), reportedly put two separate proposals on the table during the creditors’ meeting in Seoul on Friday. Following the meeting, they decided on the proposition that set the trademark fee at 0.5 percent of annual revenue with 12 years and 6 months of mandatory usage.

The motion by KDB and creditors is seen as a compromise between each of the terms proposed by Kumho Industrial and Doublestar.

Doublestar initially agreed on a 0.2 percent fee but Park Sam-koo, the chairman of Kumho Asiana Group, and Kumho Industrial, raised the fee to 0.5 percent, which the Chinese company rejected. The initial terms also imposed five years of mandatory usage on Doublestar, but Park and the group increased this period to 20 years with no right of arbitrary termination.

Creditors also conducted a management assessment on Kumho Tire for 2016, during which time the company suffered a net loss of some 38 billion won ($32.9 million). They gave the management a D rating for the second straight year - in 2015, the company posted 68 billion won in net losses, which means creditors could remove Park and other executives. Park has been delegated with management of the tire company since the workout program began in 2010.

Following the previous meeting in late June, creditors of the tire company gave an ultimatum, saying if the sale of Kumho Tire falls through, they will take extreme measures, including the ousting of the current management, a likely scenario if Friday’s proposal fails to resolve the issue. “[Creditors] confirmed the assessment,” said a source from KDB, “but they didn’t take extreme action such as dismissal.”

While creditors deem the sale of Kumho Tire to Doublestar as the last recourse to save the company, concerns continue to loom that the sale will deal a blow to the local economy.

Lee Kai-ho, a lawmaker from the Minjoo Party of Korea, said in a policy meeting at the National Assembly on Thursday, “If a Chinese company takes over Kumho Tire and its global technological prowess, then it may take the technological know-how, close down the domestic factories and move [manufacturing] to China where labor cost is much cheaper.”

Lee represents the constituencies of Gwangju and South Jeolla, where a large Kumho Tire manufacturing plant is located. Lee criticized the creditors for being “unfair” to Korean companies, including Kumho Asian Group and chairman Park, who has the right of first refusal. The KDB and other creditors declined Park’s request to form a consortium to buy back the tire company.


BY CHOI HYUNG-JO [choi.hyungjo@joongang.co.kr]