[FOCUS] Union militancy puts President Moon's labor policy into fix

By Lim Chang-won Posted : March 30, 2018, 11:20 Updated : March 30, 2018, 11:20

[Yonhap Photo]

SEOUL -- South Korean President Moon Jae-in's pro-union policy was put in a fix as public concerns grew over brinkmanship by militant unions which have rejected a reasonable compromise to avoid the shutdown of their factories or insolvency.

The deadline came near at hand on Friday, but the union of South Korea's second largest tiremaker, Kumho Tire, showed no signs of easing its tough stance, insisting it would rather submit to court receivership than a Chinese investment.

Unless Kumho Tire's union submits an agreement on cost cutting and the proposed sale of a 45-percent stake to China's Doublestar, creditors led by Korea Development Bank (KDB), a state policy lender, have threatened to put the ailing tiremaker under court receivership.

Kumho Tire has no cash to pay promissory notes and other debts that will start to mature on Monday. KDB head Lee Dong-gull has ruled out any concessions, warning even Moon's office cannot prevent insolvency.

The dispute over how to keep Kumho Tire afloat has been widely watched by voters as the insolvency of the tiremaker based in the southern city of Gwangju, a politically important place, could put a psychological strain on Moon. Labor unions are seen as crucial contributors to Moon's election victory in May last year. As a gift to workers, Moon has taken a series of pro-union steps such as a mandatory minimum wage hike.

There has been a negative public opinion about the unconditional use of tax money into troubled companies, and KDB regards the Chinese company as the sole candidate to buy Kumho Tire, refuting argument by union leaders that a domestic company should take over to prevent a technology leak.

Doublestar Chairman Chai Yongsen [Yonhap Photo]

Doublestar Chairman Chai Yongsen has clarified his strong desire to run the debt-stricken tire company as an independent entity which would focus on mid and high-end tires for passenger vehicles. In March last year, Doublestar signed a share purchase agreement to secure a 42.01 percent stake in Kumho Tire, but the deal broke down because of disputes over job security and the union's negative attitude among other things.

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.

Meanwhile, KDB is hesitant to inject new money into the South Korean branch of General Motors, which is calling for an agreement by Saturday between labor and management on a cost-cutting rehabilitation package. GM has warned of dishonored bills if it cannot win a fresh bailout from creditors. Union leaders oppose layoffs for the next 10 years.

GM Executive Vice President Barry Engle has suggested GM Korea needs some 600 million US dollars by the end of April for debt payment and retirement bonuses. The American company described its decision on February 13 to close one plant in Gunsan by the end of May as inevitable for the restructuring of its global business. GM officials complained about excessive demands and union activities by workers.

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