Recovering tire producers eye expansion

Hankook seeks new growth engine; Kumho strives to resume  building U.S. plant


The nation’s two largest tire manufacturers ― Hankook and Kumho ― are preparing for stiffer competition at home and sales battles with global players overseas.

Though the companies had to delay investment and a variety of projects, their recent painstaking efforts to improve their financial status and management structure have been highly evaluated in the market.

Kumho Tire, which has been under joint control of creditor banks, is expected to graduate from the debt restructuring program within a year.

Kumho Asiana Group chairman Park Sam-koo has become a major shareholder of the company, recently acquiring a 3.3 percent stake.

Banks hold a 51.5 percent stake in Kumho Tire, followed by retail and corporate investors with a 37 percent stake, and Kumho Asina Group’s cultural foundation with 5 percent.

The financial status of Kumho Asiana’s subsidiaries has deteriorated over the past few years after it bit off more than it could chew in lavish M&A deals.

Kumho Tire also had to suspend its construction of a manufacturing plant in the U.S. state of Georgia as the company was placed under joint management of creditors.

It broke ground for the construction of its first factory in the U.S. in 2008, aiming at close business coordination with Kia Motors and Hyundai Motor that have factories in the southeastern states of Georgia and Alabama, respectively.

Should its Georgia plant go into operation, it will have the capacity to roll out 3.2 million tires a year.

As well as Hyundai and Kia, Kumho had planned to provide U.S.-based Chrysler Group with a certain portion of tires.

Kumho, which has a combined capacity of more than 55 million tires at home and abroad, will likely be able to produce more than 100 million tires when the Georgia factory is completed.

The company saw its stock prices surge by about 30 percent, surpassing the growth rate of the Korea Composite Stock Price Index so far this year.

While Kumho Tire posted a deficit for the fifth consecutive year since 2006, there is a high possibility that it will turn into a surplus this year, analysts said.

Its operating profit increased by 61 percent to 84 billion won ($72 million) and net profit by 226 percent to 8.6 billion won during the first quarter of 2012.

Hankook Tire is about to see its operation divided into two business sectors by revamping the management structure.

Under the project, the company is considering pushing for re-listing on the main bourse in early October after undergoing a trade suspension for a month from August 31.

Hankook is looking to spin off into a holding company and a tire business-focused entity.

The holding company is likely to be a non-tire entity that will focus on venturing into new business areas.

The listed Korean tire giant recently filed a disclosure on the Korea Exchange, saying that it was considering a spin-off, but that nothing had been decided. Its statement continued that the company will re-file a disclosure in a month, after the company maps out further details of this plan.

Industry analysts claimed that the spin-off is not only part of efforts to become a holding company, but also part of Hankook Tire chairman Cho Yang-rai’s succession plan for his children.

Hankook Tire, which has a 6.7 trillion won market cap, has already filed an application to the Korea Exchange for a re-listing review as it seeks to transform itself into a holding company.

The 75-year-old Yang-rai, whose brother is Hyosung chairman Cho Suck-rai, has a majority 15.99 percent stake in Hankook Tire, while his four children own a combined 19.18 percent stake in the company. The chairman’s family holds a combined stake of more than 35 percent, according to a regulatory filing.

Cho has been forced to pursue a succession plan as he is now well past retirement age, analysts claimed. Also, they speculated that Cho’s two sons ― Hyun-shick and Hyun-bum, both presidents of Hankook Tire ― are expected to increase their ownership in the company amid a possible restructuring.

By Kim Yon-se (kys@heraldcorp.com)