SEOUL -- In an effort to speed up the sale of a 45-percent controlling stake to China's Doublestar, South Korea's second-largest tiremaker, Kumho Tire, has applied for state approval to stop the production of fighter jet tires.
Kumho Tire sent an application on May 2 to cancel its license as a defense contractor, according to the Ministry of Trade, Industry and Energy on Tuesday. "We have just started reviewing a request for the cancellation of its designation under relevant laws," a ministry official sade.
Under Korean law, the sale of a defense contractor requires government approval. Kumho Tire hopes to separate and sell its military production line to a domestic company before Doublestar takes overs. The South Korean company has provided jet fighter tires worth 1.6 billion won (1.48 million US dollars) every year.
In a vote in March, Kumho Tire's union endorsed Doublestar's investment to help the debt-stricken company avoid insolvency after the Chinese company promised to guarantee job security for at least three years.
Workers agreed to freeze their wage and reduce some work benefits while Doublestar will invest 646.3 billion won in new shares. Kumho Tire is saddled with about a total debt of 2.4 trillion won with its net losses soaring from 38 billion won in 2016 to 88.56 billion won last year.
Kumho Tire was put under a debt workout program in December 2009 due to a severe liquidity crunch. It graduated from the program in late 2014, but the company's crisis has been aggravated by poor sales in China and mismanagement by its former owner, Kumho Asiana Group.
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