SEOUL (July 25, 2008) — Production resumed at GM Daewoo Auto & Technology's main Bupyeong, South Korea plant July 22 after a price dispute with tire suppliers halted lines there.
Korean tire makers Kumho Tires Co. Inc. and Hankook Tire Co. Ltd. stopped delivering tires to GM Daewoo on July 18 because the auto maker would not agree to higher tire prices. The suppliers said rising material costs necessitate the increase.
Later the same day, a Seoul court agreed with an injunction filed by GM Daewoo to lift the suspension of tire supplies. The tire makers complied four days later.
GM Daewoo estimates it lost production of 3,000 Aveo compacts and 1,200 Epica sedans, both of which are exported as Chevrolets to North America and Europe. The Epica is sold in Canada.
GM Daewoo gets more than 85 percent of its tires from the two tire makers.
In March, GM Daewoo agreed to a 5.5 percent price increase on tires from the two companies in March, according to Kumho. But a follow-up request July 1 for an additional 12 percent was rejected by the auto maker. GM Daewoo said the move violated local trade laws, as well as its long-term contracts that include fixed prices.
GM Daewoo made an “exceptional concession” in the case of the first price increase and did so out of consideration of rising material prices, according to the company.
A Kumho spokesperson said the tire maker´s contract with GM Daewoo doesn't prevent Kumho from raising prices. Kumho will look into further legal options and has no choice but to seek an increase, given a 50 percent boost in raw material prices, he said.
“We do not want to be portrayed as taking a hard-line stance,” he said. “We just want to say we have no choice but to raise supply prices. We have been pushed to the edge.”
Hankook Tire said that since March, its costs have risen 40 percent. Most of that comes from oil and rubber price increases. “We don´t have long-term contracts, like GM Daewoo has with us, with our global suppliers,” a company official said.