1/16/2014

Editorial: Time for Cooper, Apollo to start damage control

Comments Email Print

Rubber & Plastics News

While a number of visits to court undoubtedly still await Cooper Tire & Rubber Co. and India's Apollo Tyres Ltd. over their failed merger deal, it's imperative that both tire makers start preparing for a future without each other.

Cooper's decision to pull the plug Dec. 30 on Apollo's $2.5 billion deal proved what had been evident for weeks—the engagement was never going to make it to the altar. The announcement came one day before the deadline for Apollo to terminate the deal if the agreement had not been concluded to both parties' satisfaction.

The courts still must decide on such things as termination fees that were written into the negotiated agreement. Cooper claims the $50 million termination fee to be levied against it doesn't apply, but it will try to make Apollo pay a $112.5 million termination fee, along with other damages.

These matters will be decided by attorneys and the courts. The leaders of both firms, though, need to be concerned with damages of a different kind and start performing damage control.

For Cooper, first on the agenda will be to fix the mess that is its joint venture in China, Cooper Chengshan Tire in Rongcheng. It didn't matter that Cooper owned 65 percent of the JV. When the Findlay, Ohio-based firm threw in with India's Apollo, it became the enemy, and the workers and minority owners of Cooper Chengshan joined forces to do battle.

Things got so bad, the operation stopped making Cooper-brand tires, Cooper officials were denied access to the plant, and they couldn't even get needed data to complete the firm's financial reporting.

Cooper also must do some fence-mending with dealers. One of Cooper's historic strengths has been the loyal support of its independent dealer network. They viewed Cooper as one of the last American-owned tire makers making tires in the U.S.—despite its sourcing a growing number of tires from China. Some, though, say Cooper's fill rates have deteriorated since the merger deal, and the tire maker better start working harder to keep their business.

At Apollo, the disintegration of the deal is a big setback in its efforts to grow globally and make a big splash in the North American market. It said it remains a solid company and that it has opportunities elsewhere on the globe, but buying Cooper was the purchase that would have made its goals reachable with one big move.

So the message to both firms is clear: Learn from the mess that the last seven months has brought, but keep focus clearly on the road ahead.