Unionized workers at Kumho Tire Co. on Sunday voted to accept creditors' plan to sell the debt-ridden tiremaker to China's Qingdao Doublestar Co. to avoid being placed under court receivership.
The 3,100-member union backed the proposed sale plan in a vote held at the tiremaker's main plant in Gwangju, 330 kilometers southwest of Seoul, for two hours starting at 10:00 a.m.
In the vote, in which 2,741 union workers participated, 60.5 percent of them gave the go-ahead to the sale plan, the union said in a statement.
On Saturday, the company and its union tentatively agreed to the creditors' plan to sell the country's second-largest tiremaker by sales to Doublestar, which vows to make investments in Kumho Tire and guarantee job security for the existing 5,000 employees, including about 2,000 office workers, for three years after acquisition.
To help revive the financially troubled tiremaker, the union has agreed to return some of their bonuses for 2018 and 2019, and to improve productivity at its plants, while accepting a wage freeze and a reduction in some work benefits by 2019.
Moreover, Kumho Tire, its union, main creditor Korea Development Bank (KDB) and Doublestar have agreed to form a "future committee" to help put Kumho Tire back on track.
The sudden twist comes after the government urged the union to agree to the plan to turn over management to the Chinese truck and bus tiremaker by the end of March or face court receivership in April.
In early March, Kumho Tire's creditors led by the KDB announced that they aim to sell Kumho Tire to Doublestar as it is the "only option" to turn the tiremaker around. They asked Kumho Tire and its union to forge an agreement on the sale plan by March 30.
But the union had strongly objected to such a move, arguing the acquisition by the Chinese tiremaker could lead to massive layoffs and the stealing of technologies, as was the case with China's SAIC Motor Corp.'s takeover of SsangYong Motor Co. more than a decade ago.
On Friday, the presidential office Cheong Wa Dae and creditors spoke with one voice about the sale plan, citing it is the only possible option to attract a large investment from Doublestar and improve the tiremaker's deteriorating financial status for a turnaround.
The union appears to be kneeling down to accept the sale plan at the last minute due to escalating pressure from the government and creditors.
Kumho Tire faces maturing debt worth 27 billion won ($25 million), and it has a whopping 2.4 trillion won in debt owed to domestic financial institutions. Worse still, its net losses widened to 88.56 billion won in 2017 from 37.9 billion won a year earlier.
Its going concern value stands at 460 billion won, far short of the firm's liquidation value of 1 trillion won, showed an accounting firm's due diligence on it.
In its proposal, Doublestar said it will invest 646.3 billion won in Kumho Tire's new shares, which will allow the Chinese tiremaker to become the biggest shareholder, with a stake of 45 percent. The Chinese truck and bus tiremaker said it will guarantee job security for existing union workers for three years after taking control of management.
If the rights issue is successful, KDB-led creditors will collectively own a 23.1 percent stake in Kumho Tire.
In March last year, Doublestar signed an initial 955 billion-won contract with the KDB-led creditors to buy a 42.01 percent stake in the Korean tiremaker.
The deal, however, was scrapped in September when creditors rejected Doublestar's demand to cut the purchase price by 16 percent to 800 billion won, citing deteriorating earnings. (Yonhap)