RANCHO CUCAMONGA, Calif. (April 22, 2010)—Kumho Tire Co. Inc., which has been in a financial vise grip for months and barely avoided receivership, has reached a final agreement with its unionized workers in South Korea, averting any further possibility of a strike at its three factories there.
According to executives with the company's Rancho Cucamonga-based Kumho Tire U.S.A. Inc. distribution arm, the union voted to accept Kumho's proposal, with final details to be ironed out in the coming days. The agreement will then be presented to the parent company's board of creditors.
Earlier, the union had rejected a wage agreement with management that included salary cuts and threatened to go on strike.
The resolution between Seoul, South Korea-based Kumho Tire, that country's second-largest tire maker, and its union will bring an infusion of $100 million in immediate funds to the company and begin the process of Kumho's creditors supplying more than $450 million in fresh loans as part of a debt restructuring “workout” program.
“The agreement brings forth renewed energy for Kumho Tire U.S.A. and starts us on the road to improvements in efficiency and overall competitiveness” said J.B. Kim, president and C.E.O. of Kumho Tire U.S.A.
In late December Kumho Asiana Group agreed with its main creditor to put two of the group's affiliates—Kumho Industrial Co. and Kumho Tires—into a “debt workout” procedure to ease the group's cash shortage, exacerbated by its acquisition in 2006 of Daewoo Engineering and Construction Co. That process, practiced in South Korea, does not involve the country's court system, and allows a company and creditors to work together to address their issues. The work-out is permitted for companies that are presumed to have a high possibility of business normalization but have suffered temporary difficulties in repaying loans to financial institutions, Kumho explained at the time.
Earlier this year, at Kumho Tire U.S.A.'s annual dealer meeting, J.H. Kim, president and CEO of Kumho Tire, reassured dealers that “Kumho is here to stay,” and despite the parent firm's financial struggles, “we have sufficient supplies for all our customers.”
The company operates a central distribution facility in Rancho Cucamonga and four additional warehouses in Atlanta, Chicago, Dallas and New Brunswick, N.J.