Kumho Tire raises trademark fee

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Kumho Tire raises trademark fee

Park Sam-koo, chairman of Kumho Asiana Group, on Friday effectively turned down a request by Kumho Tire’s creditors to allow Doublestar, the top bidder of the Korean tire maker, to use the company’s trademark.

Park presided over a board meeting of the group’s de facto holding company, Kumho Industrial, which holds the trademark rights to Kumho Tire. There, he affirmed that Doublestar, a Chinese tire producer hoping to buy Kumho Tire, should pay 0.5 percent of its annual revenue as a trademark usage fee. Park declined to let Doublestar end the contract at will.

The main creditor of Kumho Tire, Korea Development Bank, had originally requested the group take 0.2 percent of annual revenue as a trademark fee and allow Doublestar to end the contract at any time with three months’ notice.

While Kumho Industrial said in a statement Friday that it will “actively cooperate on issues regarding trademark rights” and allow Doublestar to use the Kumho Tire name, the terms suggested by Kumho Industrial are difficult for creditors and Doublestar to accept, according to industry sources.

Kumho Industrial explained the calculation was based on a comparison of rates taken by other major companies like Samsung and Kolon. It also considered management costs it could incur during the 20-year contract period when Doublestar uses the Kumho Tire name exclusively, it said.

“Since our group and group affiliates also use the ‘Kumho’ name, Doublestar’s use of the company trademark can have an impact on brand image and the businesses of other Kumho-branded companies, which could sometimes result in losses,” a Kumho Asiana Group spokesperson said.

Kumho Industrial noted that Renault Samsung Motors pays 0.8 percent and catering service provider Samsung Welstory 0.5 percent of earnings to use the Samsung name.

Considering Kumho Tire makes roughly 3 trillion won ($2.7 billion) revenue a year, Doublestar would have to pay about 15 billion won in trademark fees, compared to 6 billion under the initial plan. Industry insiders say this is too high a cost for the Chinese company to pay, especially when it bid nearly 1 trillion won to acquire Kumho Tire. The brand value of the company was included as part of the high price Doublestar decided to pay.

Park’s decision on Friday puts the ball back in Korea Development Bank and Doublestar’s court. “We will pass on the terms suggested by Kumho Industrial to Doublestar for them to decide,” a KDB spokesperson said. “If the acquisition process fails, it could rob Chairman Park of his management rights [on Kumho Tire].”

The bank has been pressing Kumho to accept the initial trademark rights proposal by offering to extend the due date on 1.3 trillion won in debt that Kumho Tire needs to pay back by the end of this month. The bank intended to give the company another three months to pay back the debt if the deal with Doublestar proceeds well.

If the due date is not pushed back, the debt is expected to burden Kumho Asiana Group overall and push Kumho Tire into court receivership at worst.

BY KIM JEE-HEE [kim.jeehee@joongang.co.kr]
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