Aggressive Courtship
The chief of Qingdao Doublestar Co. visited South Korea and showed his determination to become a global leading tiremaker through co-prosperity with Kumho Tire.
During a press conference at the KDB headquarters in Yeouido, Seoul, on March 22, Doublestar Chairman Chai Yongsen said, “Doublestar wants to become a global top 10 tiremaker by cooperating with Kumho Tire, not stealing technology. Just like Chinese car maker Geely that acquired Volvo car brand, we will guarantee Kumho Tire's independent management.”
Kumho Tire is the country’s second-biggest tiremaker and No. 14 in the world by sales, while Doublestar is the 11th-largest tiremaker in China and the 23rd in the world. When Doublestar acquires Kumho Tire, the company will be able to jump up to be the leading tiremaker in China and the 10th-biggest in the world, according to industry sources.
Lee Dae-hyun, senior vice president of Korea Development Bank, also said, “Doublestar basically wants to exercise its stockholder's rights as a stockholder and it plainly said it would manage the company by accrediting outside directors. For domestic management, Doublestar will organize the permanent management with local executives and manage the company based on its stockholder’s rights and outside directors. That’s what company meant independent management. It is meaningful in that Doublestar guarantees independent management and takes a governance structure in the deal but we have come up with provisions to contain dividends and technology transfer. We should not discuss whether it is foreign capital or domestic capital.”
In regard to a controversy over the deal that can become a repeat of the sale of SsangYong Motor to China's Shanghai Automotive Industry in 2004, which was criticized as the Chinese company allegedly acquired SsangYong's core technologies while not investing enough to strengthen the Korean carmaker's competitiveness, Chai said, “Job guarantee is specified in an agreement. As for the three-year job guarantee, it just followed the expression recommended in international M&A deals and does not necessarily mean a massive shutdown of plants or massive layoffs three years later.” He also added, “Kumho Tire’s labor union has played a huge role in the company’s achievements today. We will respect all the agreements right now and in the future. We will consider labor union, shareholders, management, partner companies and clients as a group sharing a common destiny and will normalize the company as soon as possible after the acquisition.”
On the other hand, Kumho Tire’s labor union demanded a 10-year job guarantee. It said through its press release, “The company and creditors are emphasizing formal logic that collective agreement and employment are legally guaranteed because the acquisition by Doublestar just means that Doublestar is a new major shareholder. However, when Doublestar carries out management policies such as downsizing and shutting down domestic plants, domestic employment guarantee become virtually meaningless. We need objectivity to guarantee employment along with management plans for ten years from now.”
Accordingly, Chai and Korea Development Bank Chairman Lee Dong-gull visited the Gwangju factory after the press conference to persuade Kumho Tire’s labor union but the union declined to meet the two. An official from the union said, “We were told by the KDB that Chai wanted to meet us a day earlier. Even if Doublestar submits documents regarding its investment in Kumho Tire, we need some time to review them and it is impossible to have a meeting right away. When we receive the documents, we will review them first and then decide whether to meet with the chairmen of the KDB and the Chinese company.”
Kumho Tire's creditors extended the deadline for the company’s debt payment late last month and asked Kumho Tire's labor union to submit its self-rescue plan agreement by March 30. However, the agreement was scrapped because of the union's opposition.