Due to haphazard Procedure
It has been found that Kumho Tire’s overseas replacement equipment (RE) sales fell by more than 10% year on year in the first quarter of this year. Its sales dropped in most regions during the period, including Europe, Latin America and Asia. Overseas sales constitute two-thirds of the company’s total sales.
The drop in sales is because of a haphazard disposal of the company. With the tire manufacturer likely to be sold to Qingdao Doublestar Tire Industrial, it is predicted that the well-known Kumho brand will not be usable down the road. Creditors including the Korea Development Bank failed to clearly deal with the matters related to the trademark rights during their negotiations. Besides, some procedural problems have hindered the disposal of the company to the point of disturbing its global clients. South Korean automakers are looking to work with other original equipment (OE) suppliers because of the same reason, too.
The Chinese tire manufacturer, which ranks 34th in the global tire industry, was selected as the preferred bidder in January this year. Kumho Tire is currently the 14th-largest in the same market. Many in the industry are thinking that the quality and brand value of Kumho Tire’s products are likely to decline once the former acquires the latter. Its clients in North America, Europe, Latin America and Asia are now concerned over whether they can be continuously supplied with Kumho products with the sale of the company not going well and uncertainties mounting. Many of them are currently cancelling or deferring the execution of contracts.
Under the circumstances, Kumho Tire is in no position to raise the prices of its products in spite of recent increases in raw material prices. Needless to say, this is negatively affecting its profitability. Besides, the company’s sales in the South Korean market fell approximately 10% in the first quarter of this year. An increasing number of stock market analysts are forecasting that at least some operating losses must have been inevitable in that quarter.