Avoiding Worst Case
Kumho Tire showed its trial to avoid being putting into court receivership. Its creditors gave in, saying that they will get the labor union's consent again when they sell off the tire company to a foreign company, and the labor union temporarily agreed with the creditors’ and the company’s management normalization plan. However, this does not mean that the conflict between the creditors and the labor union has been completely resolved.
According to Kumho Tire and its labor union on February 28, both sides were close to a tentative agreement to go ahead with business normalization. The labor union had a fierce fight with the management and the creditors to such an extent that the labor union accepted the proposal from the management and the creditors on February 28, two days after February 26, the deadline set by the creditors. The labor union changed its mind to accept the self-rescue plan as the creditors said, "We will get the labor union’s consent before the overseas sale of the company."
It is said that although the two sides ironed out differences a great deal on the day, they did not reach the final agreement yet. Kumho Tire union officials said, "The creditors orally proposed changing the labor union's consultation to its consent when selling off the company to a foreign company," a labor union official said. "We need to further discuss the issue of securing binding power with documents." In this regard, creditors and the management said, "There is nothing decided yet."
Kumho Tire's management normalization work is expected to begin as the labor union decided to temporarily accept the self-help plan. Kumho Tire will hold a board of directors meeting and sign an MOU on the implementation of management normalization with the creditors when the provisional agreement is passed via unionists' votes. If the MOU is signed, extending the maturity of bonds worth 1.3 trillion won will go into effect in earnest. At the heart of business normalization work is tightening its belt. First of all, wages will be frozen during the workout period and an unpaid leave system will be put in place. In addition, the company’s wage system will be improved, the wage peak system will be implemented, and welfare and benefit programs will be changed.
Creditors and unions have agreed to push for the normalization of management but there is still a long way to go. The creditors are overtly expressing its view that finding the owner of Kumho Tire through the attraction of foreign capital is the best way to normalize Kumho Tire management. Up to now, Doublestar has been the most likely candidate. According to the financial sector, negotiations have progressed close to the final decision that needs to be made between the main creditor bank KDB and Doublestar.
In the end, the name of the game is the labor union’s consent. "The labor union has not changed its position to choose court receivership rather than to let the company sold off to Doublestar," a labor union official said. “If the creditors do not revise the existing plan, the Kumho Tire Incident will have little choice but to go back to square one again.”