Receivership Inches Closer Following Rejection of Kumho Pay Deal

The thumbs down given by workers at Kumho Tires to a plan outlining wage cuts may jeopardise the company’s ongoing viability. According to the JoongAng Daily, a Korea Development Bank official dealing with the Kumho Asiana Group stated that “Since the agreement between the union and management was rejected, the workout process cannot continue. Unless union workers agree to restructuring, they won’t be able to save their company.” The deal, part of a larger agreement between Kumho Asiana and its creditors, would have permitted a 10 to 15 per cent reduction in wages and the removal of incentives. This would, notes the Korean newspaper, lead to monthly pay packets being up to 40 per cent smaller.

The bank official, Ahn Yang-soo, said a memorandum of understanding between management at Kumho Tires and the creditors needs to be signed by April 20 or a debt workout will be impossible. Ahn also said the creditors would place 100 billion won (US$89.6 million) in emergency funds for the tyre maker and a $30 million letter of credit, which they promised earlier as part of the workout programme, on hold. If the debt workout programme cannot be successfully implemented, Kumho Tire will be forced to go into court receivership with a court appointed trustee placed in control.