GM Daewoo starts production after tire price dispute

2008 Chevrolet Aveo

SEOUL - Production at GM Daewoo Auto & Technology's main Bupyeong plant in South Korea resumed Tuesday, July 22, after a price dispute with tire suppliers halted lines there.

Korean tire makers Kumho Tires Co. Inc. and Hankook Tire Co. Ltd. stopped delivering tires to GM Daewoo on July 18 because the automaker would not agree to higher tire prices. The suppliers say rising material costs necessitate the increase.



Later the same day, a Seoul court agreed with an injunction filed by GM Daewoo to lift the suspension of tire supplies. The tire makers complied four days later.

GM Daewoo estimates it lost production of 3,000 Aveo compacts and 1,200 Epica sedans, both of which are exported as Chevrolets to North America and Europe. The Epica is sold in Canada.

GM Daewoo gets more than 85 percent of its tires from the two tire makers.

In March, GM Daewoo agreed to a 5.5 percent price increase on tires from the two companies, according to Kumho. But a follow-up request July 1 for an additional 12 percent was too much for the automaker. In a statement, GM Daewoo said the move violated local trade laws, as well as its long-term contracts that include fixed prices.

GM Daewoo made an "exceptional concession" in the case of the first price increase and did so out of consideration of rising material prices, according to a statement.

Kang Kyu-jin, a Kumho spokesperson, said the tire maker's contract with GM Daewoo does not prevent Kumho from raising prices. Kumho will look into further legal options and has no choice but to seek an increase, given a 50 percent boost in raw material prices, Kang said.

"We do not want to be portrayed as taking a hard-line stance," he said. "We just want to say we have no choice but to raise supply prices. We have been pushed to the edge."

Hankook Tire says that since March, its costs have risen 40 percent. Most of that comes from oil and rubber price increases.

Said Hankook spokesperson Calvin Pak: "We don't have long-term contracts, like GM Daewoo has with us, with our global suppliers."

[Source : Automotive News .. Sub req.]