FINDLAY, Ohio – Cooper Tire & Rubber Co. (Cooper), the sixth largest tire company in the world, signed an agreement with Chengshan Group Co., Ltd. (Chengshan) and the CCT Labor Union to establish a path forward for the Cooper Chengshan (Shandong) Tire Co., Ltd. (CCT) joint venture, according to a Cooper Tire release on January 31.
The agreement establishes a process for determining the future ownership of CCT, which begins with engaging an independent valuation firm to determine the fair market value of CCT. Once a valuation is established, Chengshan will have the first option to either purchase Cooper’s 65 percent interest or to sell its 35 percent interest to Cooper, making CCT a wholly-owned subsidiary of Cooper. If Chengshan determines not to exercise either of these options, Cooper has the right under the agreement to purchase Chengshan’s 35 percent interest. The options are conditioned on Cooper reporting its financial results within a specified timeframe. In the event that neither party elects to purchase the others’ interest, the agreement allows for continuation of the joint venture as currently structured.
The agreement further stipulates that should Chengshan purchase Cooper’s stake in the joint venture, Cooper will continue to have offtake rights with CCT agreeing to produce Cooper brand products, including truck and bus radial (TBR) tires, for a minimum of three years.
The agreement also confirms that, with the support of the labor union and Chengshan, normal operations will be sustained at CCT including the production of Cooper brand products and access to financial and operational data that will allow Cooper to resume regular financial reporting.
“With this agreement, Cooper gains certainty regarding sustained normal operations at CCT as well as a defined process for determining the long-term ownership of the joint venture based on a fair market value,” said Roy Armes, chairman, president and CEO of Cooper.
“If Cooper sells its interest in CCT to Chengshan, the commercial offtake rights secure a future product supply for our customers. Cooper will also have added flexibility to enter into acquisitions, new offtake relationships, or possible greenfield development of additional production capacity anywhere around the world to support the expansion of our TBR business. If Cooper buys Chengshan’s minority interest in CCT, we will have the certainty of a wholly-owned asset with an experienced team in place that will continue our China growth strategy,” Armes added.
“In either scenario, China is a core growth market for Cooper and we will continue to rely on the existing sales and marketing organization and technology team we have in China, as well as our CKT manufacturing operation located outside of Shanghai in Kunshan. This wholly-owned facility has continued to grow and evolve into a world-class operation with ample capacity for further expansion,” Armes said.
“Overall, this agreement puts Cooper in a solid position to aggressively pursue our strategic plan, which is focused on driving stockholder value as its overarching goal. Cooper now has a clear path to resume regular financial reporting, and as the long-term ownership of CCT is determined, we will continue to address our capital deployment options to deliver maximum value for our stockholders,” Armes concluded.
The agreement is an emergency solution to the CCT worker strikes. CCT Labor Union organized the first worker strike on June 21, 2013 and many more later to resist the acquisition of its parent company Cooper by India Apollo Tire Group, the 16th largest tire company in the world and the largest one in India. Cooper and Chengshan released the acquisition announcement on June 13, 2013 as CCT was a part of the deal.
CCT workers have organized many strikes since June 21, 2013 to resist the acquisition of its parent company Cooper by Indian Apollo Tire Group.
CCT workers hold slogans calling on Cooper to refuse Apollo’s acquisition.