Kumho Tire "Seizure of Company Accounts by Non-Regular Workers' Union Could Lead to Severe Liquidity Crisis"

[Asia Economy Reporter Kiho Sung] Kumho Tire strongly opposed the seizure of the company’s operating funds account by the non-regular workers’ union, stating that "the account seizure could lead to a serious liquidity crisis."

According to industry sources on the 31st, the Gwangju District Court recently approved the 'Application for Seizure and Collection Order' filed by the Korean Metal Workers' Union Kumho Tire Non-Regular Branch, citing a request to preserve wage claims. As a result, Kumho Tire’s main bank, Woori Bank, had its operating funds account seized. This has led to the suspension of salary and payment for goods. The amount demanded by the non-regular workers’ union reaches 20.4 billion KRW, which is about 37% of Kumho Tire’s total operating profit last year (57.4 billion KRW).

Kumho Tire stated, "We requested the non-regular branch to defer payments only until the business environment improves, offering to pay part of the amount first and expressing willingness to continue negotiations depending on the situation." However, "the non-regular branch is demanding payment equivalent to 37% of last year’s operating profit, which matches the deficit in the first quarter of this year. Some branches of the regular workers’ union, who share the same worker status, have even criticized this as an excessive demand."

The company added, "In fact, regular Kumho Tire employees never took such unreasonable actions even during times when their livelihoods were threatened." It emphasized, "During the past workout period, there was a time when salaries were not paid for about half a year. Even in such difficult circumstances, no actions harmful to the company were taken."

Kumho Tire also warned, "If the seizure situation continues with corporate account transactions halted, it could lead to a decline in the company’s credit rating." It further stated, "The bigger problem is that, amid the already deteriorated business environment due to the spread of COVID-19, the account seizure could push the company into a severe liquidity crisis."

Marking its 60th anniversary this year, Kumho Tire is facing difficulties. Due to the sharp drop in tire demand caused by the COVID-19 pandemic, the operating loss of 18.4 billion KRW in the first quarter is expected to increase to over 20 billion KRW in the second quarter. Despite the urgent need for every penny, the operating funds account has been seized, and there is no suitable alternative at present.