Factory Stop After the 31st... Will Kumho Tire's 'Dialogue Table' Open?

[Asia Economy Reporter Kiho Sung] Kumho Tire employees returned to work on the 6th after a five-day vacation. However, their workplace is facing a major crisis following the seizure of the company’s bank account by the non-regular workers’ union and demands for contract termination from subcontracting partner companies. Both the company and the non-regular workers’ union have expressed willingness to engage in dialogue, but their positions on the regular employee issue remain sharply divided, making a quick resolution unlikely.

According to Kumho Tire on the 8th, six companies responsible for logistics, cargo handling, and raw materials announced their intention to terminate contracts on the 31st of last month. This is in accordance with the regulation requiring one month’s notice for mid-term contract termination, meaning they will comply with the contract only until the end of this month. The companies cited management difficulties such as reduced subcontracted volume as reasons.

The non-regular workers’ union stated that about 720 employees work at these six companies, handling ten different processes. If their contracts are terminated simultaneously, the entire Kumho Tire factory would effectively come to a halt.

The company’s position is to keep the factory operating normally by finding replacement companies, but this is not an easy task. In-house partner companies claim that since Kumho Tire was acquired by the Chinese company Double Star, subcontracting fees have decreased, resulting in continuous deficit management. For employee job succession, new partner companies must emerge, but due to inevitable deficit management, it is expected to be difficult to find companies willing to take them on. Furthermore, it is unlikely that Kumho Tire, as the primary contractor, will take responsibility for the non-regular workers employed by partner companies.

However, a more urgent issue than the termination of partner company contracts is the problem of the company’s bank account seized by the non-regular workers’ union. If the account seizure continues for a long time, it will inevitably cause liquidity problems and disrupt payments. The payment of employees’ salaries scheduled for the 27th cannot be guaranteed. Kumho Tire has not been able to pay vacation allowances of 500,000 KRW per person this year, as required by this year’s labor-management collective bargaining agreement.

As the company’s situation worsens, calls for dialogue are gaining strength. Kumho Tire recorded consolidated sales of 488.6 billion KRW and an operating loss of 18.4 billion KRW in the first quarter of this year. Due to the added impact of the COVID-19 pandemic in the second quarter, it is forecasted that the first half deficit will reach 50 billion KRW.

A Kumho Tire official said, "Currently, this is the worst situation with time running out," adding, "Labor and management must work together through special consultative bodies to resolve this issue."

On the other hand, the non-regular workers’ union insists that the company must prepare a plan regarding regularization before entering into dialogue. A union representative stated, "Although dialogue has been ongoing continuously, no significant results have been achieved," emphasizing, "The company must disclose its plan for regularization in accordance with the court’s ruling before we can engage in talks."