Kumho Keep Faith
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Kumho UK has been awarded a contract to supply tyres as original equipment to specialist van manager LDV. 70 per cent of LDV’s annual production of Pilot and Convoy vans will be equipped with Kumho’s radial 857 commercial van tyres in sizes 185 R14 and 205 R14. The contract follows a rigorous quality audit at Kumho’s Kwangju plant and tyre testing at the MIRA proving ground in the UK, resulting in the Korean manufacturer being awarded Approved Supplier status.
Goodyear shares fell to just 17 US$ on Friday; a loss of 6 per cent over the week. Asian companies fared better, with gains for Hankook (+10 p.c.), Kumho (+ 9 p.c.), Sumitomo Rubber (+ 8 p.c.) and Bridgestone (+ 8 p.c.).
Kumho was the overall winner in a test of ten tyre brands, including a number of premium names, conducted by the Australian Consumers’ Association. The tests included cornering and braking in the wet and on dry roads and Kumho was named the best overall performer.
For the fourth year running, Michelin ranks highest in the UK OE tyre satisfaction study, receiving the highest ratings for durability; the factor rated as most important by UK consumers. In second place were Pirelli and Kumho, with the latter scoring well because owners experience few problems with the brand. The survey questions over 3,000 UK motorists in their first year of car ownership, regarding tyre quality, performance and brand image. Following the top three brands, three further brands (Bridgestone, Dunlop and Goodyear) al scored the same. Bridgestone received highest marks in the study for traction/safety, while Goodyear and Pirelli tied for top spot in tyre design.
A Memorandum of Understanding was signed this week regarding the purchase of 80 per cent of the tyre manufacturing business of Kumho. The buying consortium is headed by JP Morgan Chase and includes US equity fund Carlyle Group. At an estimated $1.5 billion, the sale – which still has to be finalised – would be South Korea’s largest-ever asset sale to foreign interests.
Kumho Industrial recorded a net loss for 2001 of 221.5 billion Won (US$169.5 million) on a turnover of 2.68 trillion Won. This loss is an increase of 114 per cent over the year 2000 loss of 103.4 billion Won. Half the loss is accounted for by sales of assets, such as buildings, at a loss. On the positive side, Kumho’s tyre business performed very well, turning in a profit. Kumho is currently involved in negotiations to sell its tyre division for US$1.5 billion in order to reduce group debt.
Kumho has announced that it has chosen to work with an international consortium comprising Carlyle, JP Morgan and UBS Capital as the preferred partner for the sale of the Kumho Group’s tyre division. The buying group has obtained loans of 761 million dollars from the Chohung Bank and other creditors to facilitate the purchase. Kumho expect to raise up to 1.5 billion dollars from the sale of 80% of the business, but intend retaining the management rights.
The bids for 80 per cent of Kumho’s tyre operations are due in by tomorrow and the company expects to name a final candidate by the end of the month. Press reports say that at least two bids have been submitted so far by US-based consortia. If the deal goes ahead, it will be among the largest-ever asset sales by a South Korean company to foreign investors. Earlier today, Kumho’s shares rose 8.4 per cent while the overall stock market was down 0.41 per cent.
The Kumho Group, by the 11th January, will be in receipt of a letter of intent to take over the tyre division. The bid comes from a duo of US-based consortia seeking to gain position as priority negotiators in the sale of the tyre division. One consortium is led by Carlyle, the other by Goldman Sachs. Kumho aims to sell around 80 per cent of its interest in Kumho Tire for about $1.5 billion (1.67 billion Euro).
Kumho has announced that it will supply 200,000 tyres in 2002 for VW’s new Polo. This follows another OE contract awarded last October, which saw the Korean manufacturer supply tyres for VW Beetles, produced at VW’s factory in Mexico. Kumho says it will supply 250,000 tyres for the Beetle in 2002.
In South Korea, Kumho has revealed that it is on the verge of selling 80 per cent of its tyre unit for a price between $1.2 and $1.5 billion. The buyer is named only as “a foreign investment fund” but unconfirmed reports link the sale with J P Morgan and the private equity fund Carlyle Group. Carlyle was favourite to buy the ContiTech division when it was up for sale. Another report says that three foreign potential purchasers are in the running and an agreement should be reached in the next few months. The Kumho Group is having to sell assets in order to pay off debts; it currently has debts of $2.52 billion against assets of $3.3 billion.
The largest supplier of tyre cord in Korea, Hyosung Corporation, is currently suffering a strike. The country’s three tyre manufacturers, Hankook, Kumho and Nexen, have all expressed concern if the strike is prolonged. To obtain sufficient supplies of tyre reinforcing materials, the companies have been talking to Kolon Industries, the second largest supplier of these materials, and are also investigating the possibility of sourcing outside Korea.
J. M. Kim is the new managing director of Kumho UK and he comes to the new post with his own ideas and plans. He talks to TYRES & ACCESSORIES about the difference between the UK and markets elsewhere in Europe, especially the emphasis on price. He wants to raise the brand image – and selling price – of group products and he believes that this can be achieved by linking the Kumho brand to motorsports performance. Mr. Kim also talks about forthcoming changes and his ideas of working with importers to get a better price for the group’s tyres; something which he admits will not be easy to achieve.
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