Kumho Tire is facing ongoing losses due to a fire at its Gwangju plant, while also struggling with conflicts regarding future plant operations with the labor union. The impact on profitability due to U.S. tariffs is also unavoidable starting in the second quarter.
According to industry sources on the 16th, the 1 and 2 plants of Kumho Tire in Gwangju have been shut down indefinitely since a fire broke out in the 2 plant on May 17. The fire was extinguished after four days, but investigations and demolitions have been delayed due to the risk of building collapse, resulting in a lack of specific recovery plans. On-site investigations are expected to begin as early as the end of this month.
This shutdown has led the company to experience significant production setbacks. The Gwangju plant of Kumho Tire is the largest facility among the three domestic plants located in Pyeongtaek, Gokseong, etc., with an average daily tire production of 33,000 units. Annually, this equates to 16 million units, accounting for approximately 60% of the domestic plant production capacity.
The plan to achieve record sales of over 5 trillion won this year has encountered serious obstacles. The estimated damage to the company's annual sales is about 900 billion won, which is approximately 20% of last year's sales (4.5381 trillion won). Plans to expand global production capacity to 65 million units, about 5.9% more than last year, have also had to be adjusted.
As the forced leave of workers at the Gwangju plant extends, calls for the labor union to devise countermeasures are growing louder. The management plans to announce a fire recovery roadmap later this month, but the union is worried about the possibility of downsizing domestic plants and is advocating for relocation within the country. They are demanding that even the unaffected 1 plant should be temporarily operational until the transfer is completed.
Recently, the labor union held a rally and stated that Kumho Tire's largest shareholder, Doublestar, should transfer the Gwangju plant to the Bitgreen Industrial Complex in Hampyeong, Jeollanam-do. According to the union, Kumho Tire is planning to reduce the annual production capacity of its domestic plants to around 3.5 million units while pursuing the establishment of an overseas plant (new factory in Europe).
U.S. tariffs are also hampering profitability. As tariffs on tires produced in overseas plants in Korea and Southeast Asia are significantly increasing, there are growing concerns that new car sales within the U.S. may decline. Kumho Tire is currently operating a plant in Georgia that produces 3.5 million units annually, but it accounts for only about 20% of local sales.
According to export-import statistics from the Korea International Trade Association, the United States is the largest export market for Kumho Tire and two other domestic tire companies, accounting for around 30% of total sales. Last year, the export amount of domestic tire companies to the U.S. was $866.16 million (about 1.2 trillion won), which accounted for 25.3% of total tire exports ($3.41693 billion, about 4.7 trillion won).