August 18, 2013 5:11 pm

Chinese try to derail India-US tyre deal

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Chinese workers have stepped up their campaign to scupper India’s largest acquisition of a US company, warning of continuing disruption at a joint venture that is a central element of the $2.5bn cross-border deal.

The Chengshan Group operates a large factory in Shandong province with Ohio-based Cooper Tire, which accepted a buyout offer from India’s Apollo Tyres in June.

Chinese workers at the joint venture went on strike shortly after the deal was announced, and late last month Chengshan asked a local court to dissolve the venture with Cooper.

It is the first time Chinese industrial action has targeted a large offshore acquisition involving two foreign companies, exposing a new risk for multinationals operating in the country.

Chengshan managers and the joint venture’s workers complain that they were not adequately consulted over the Apollo offer. They also argue that the deal will burden their prospective Indian owner with too much debt and result in a clash of corporate cultures.

The union representing the joint venture’s 5,000 workers said they would “not welcome” senior Cooper managers assigned to the factory. The workers agreed to resume their shifts at the weekend, but insisted that they would only produce Chengshan tyres while boycotting any work on Cooper Tire branded products.

“People are angry that Cooper Tire has refused to respect the union and employees’ right to information, to make suggestions and to participate in democratic management of the factory,” the workers said in a statement. “As long as [Cooper] does not respond to our legitimate concerns in a reasonable and satisfactory manner, the strike will continue.”

Cooper said it “continues to work toward getting the plant operating fully again as soon as possible, including the production of all tyre types and brands”. Cooper and Apollo both insist that the strike will not derail their deal, which they expect to complete by the end of the year.

Cooper is the majority partner in its joint venture with Chengshan, controlling a 65 per cent stake.

“The culture gap between Chinese and US companies is so large it took us years to adapt [to Cooper],” Liu Shuhong, director of Chengshan’s legal department, said. “No one here is willing to repeat that painful experience again with an Indian company.”

“Since the beginning of this process, Apollo hasn’t listened to our concerns, met with us or shared any information,” Ms Liu added.

Apollo said the company “looks forward to engaging directly with all of Cooper’s employees at the appropriate time”.

According to Ms Liu, the head of Cooper’s international division met workers in late June but did not satisfy their demands.

“I believe that this strike has government consent,” said Li Qiang, executive director of China Labor Watch, a New York-based worker rights group. “Other joint ventures in China can learn from this strike.”

Additional reporting by Wan Li

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