Doublestar chairman visits Korea to persuade labor union

As Kumho Tire continues to face fervent opposition from unionized labor regarding the sale of the company to China’s state-run tiremaker, Doublestar Chairman Chai Yongsen is visiting Korea to persuade the labor union, the Korea Development Bank confirmed Wednesday.

While here, Chai is scheduled to hold a press conference Thursday morning at the KDB headquarters and discuss unresolved issues with creditors during the trip.

As for the labor union, Chai is expected to explain Doublestar’s future investment plans, seeking to persuade them that it will not lay off workers or put Kumho Tire up for sale after gaining Kumho’s technical know-how.

Chai’s visit comes as the recapitalization deal signed last week could fall apart without consensus from the union by March 30.

If the labor union does not agree before the deadline, Kumho Tire would go into a workout process.

Kumho Tire creditors had agreed to sell the tiremaker to Doublestar in a recapitalization effort worth 646.3 billion won ($594.6 million).

This would make the Chinese firm Kumho’s largest shareholder, with 45 percent of shares, and creditors the second-biggest at 23.1 percent.

The deal has fueled the union in holding a three-day partial strike until Friday and a general strike on Saturday.

In efforts to convince the union, KDB Chairman Lee Dong-gull went down to Kumho’s Gwangju plant earlier this week, but failed to make progress.

“Doublestar is keen on buying Kumho Tire as it is eyeing the tiremaker’s US plant to expand business, while creditors are trying to sell the company when it can before Kumho’s value drops further,” said Lee Ho-guen, a professor of the department of automotive engineering at Daeduk University.

“Chai will meet with creditors to narrow differences regarding details of the acquisition. He will most likely agree to three-year job security,” he predicted.

Chai’s remarks during an interview with Korean media last week that he was not aware of a term that guarantees three years of job security for Kumho Tire workers had stirred greater controversy, as employment succession is prioritized by the labor union.

The KDB explained that the two parties had agreed on employment succession, as is guaranteed under the Korean commercial law in recapitalization deals.

The going concern value of Kumho Tire was 460 billion won, while its liquidating value was 1 trillion won, according to due diligence conducted by Samil PricewaterhouseCoopers.

By Kim Bo-gyung (lisakim425@heraldcorp.com)