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Cover Stories Series 2011> Eye On Multinationals> Archive
UPDATED: May 5, 2011 NO. 18 MAY 5, 2011
Tire Maker's Test
Integrity and quality are vital for Kumho Tires to regain the Chinese market

TIRE INSPECTION: A worker inspects cars using Kumho tires in a designated workshop in Beijing's Haidian District. There are 41 workshops for examining recalled tires in Beijing (WANG DAN)

Kumho Tires Co.—one of China's largest tire suppliers—used to enjoy a high profile in marketing, but it turned publicity-shy on the 14th Shanghai International Automobile Industry Exhibition (2011 Shanghai Auto Show) held on April 19-28. For most visitors at the auto show, the burning question is whether their favorite exhibit is using Kumho tires or not. If yes, they will probably give up.

Their decision was the result of a recent report by China Central Television (CCTV) on March 15, the World Consumer Rights Day. According to the report, Kumho Tires' China subsidiary used excessive amounts of recycled tires as raw material in its manufacturing facility in the northern municipality of Tianjin, which may increase the possibility of rupture.

The South Korean tire maker entered China in 1994 and it has four factories in China, including one in Tianjin, two in Nanjing, east China's Jiangsu Province and one in Changchun, northeast China's Jilin Province. Although the faulty tires were produced in the Tianjin plant, consumers have lost confidence in the entire Kumho brand.

Kumho Tires has an annual production capacity of 30 million tires in China. It supplies China-foreign joint venture carmakers—Beijing Hyundai Motor Co., Shanghai General Motors Co. Ltd, FAW-Volkswagen Automotive Co., Dongfeng Peugeot Citroen Automobile Co. Ltd., as well as domestic carmaker Great Wall Motors.

Carmakers' anxiety

A total of 35 models produced by 16 carmakers in China used Kumho tires. The report has sparked anxiety among some large automakers.

On April 12, Beijing Hyundai Motor Co., Great Wall Automobile Holding Co. Ltd. and Dongfeng Yueda KIA Motors Ltd. submitted recall reports to the country's top quality watchdog, the General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ). The three manufacturers decided to recall approximately 75,000 cars equipped with Kumho tires beginning on April 15. The numbers of cars to be recalled by the three carmakers are 63,588, 4,685 and 6,419, respectively.

The report released by car manufactures said the tires to be recalled contain excessive amounts of recycled materials, which might affect the quality of the tires. To protect consumers, the carmakers will check the recalled cars and offer free replacements.

AQSIQ's statement said that the recall will be carried out by the distribution and service networks of the three manufacturers. Consumers may seek more information at AQSIQ's website (www.aqsiq.gov.cn), AQSIQ Defective Product Administrative Center's website (www.dpac.gov.cn) and China's car recall website (www.qiche365.org.cn).

Shanghai General Motors (Shanghai GM) issued a statement saying it will help handle consumer complaints or inquiries immediately.

Beijing Hyundai used Kumho tires on seven out of eight of its models. "The recall has brought us big pressure both in labor force and operating cost. We are negotiating with Kumho Tires on compensation issues. We are not sure how big the loss will be," said a staff member from Beijing Hyundai on condition of anonymity.

A lesson could be learned from Ford Motor Co.'s announcement in May 2001 that it would spend $3 billion replacing an additional 13 million Firestone tires on Ford vehicles.

In addition to the recall, some carmakers decided to abandon Kumho tires. At the 2011 Shanghai Auto Show, most of Kumho's old clients have replaced their tires with other brands. For example, Volkswagen's Golf, Satigar and New Bora models now feature tires from competing brands, as Hyundai's Elantra and Verna models. What adds to the anxieties of Kumho Tires' partners is that AQSIQ has withdrawn quality certification from Kumho Tires' Tianjin plant, which will cause production halts for some car models.

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