Monday, July 21, 2008

GM Watch: Ve haf vays of making you sell us tires!

Very strange story on CNN's Money today. It looks like GM Daewoo got a court order requiring two tire makers to keep selling tires to Daewoo, a GM owned subsidiary.

Huh? Now, why would GM need a court order to get someone to sell them car parts? Here's the key part of the story:

Hankook Tire Manufacturing (000240.SE) and Kumho Tire (073240.SE) stopped supplying tires to GM Daewoo's main Bupyeong plant at 0400GMT Friday, calling for an additional 12% price hike on top of a 5.5% rise agreed with GM Daewoo in March.

Only having read this article, it's hard to know the full story. Did Hankook and Kumho agree to sell the tires at a certain price and then reneg? Or did the agree that the tires *could* be hiked by at least 5.5%, and upon later reflection realized they couldn't justify selling the tires except at 12% more?

The former seems unlikely, since it would have made more sense for GM to just pay the extortion and sue to get the money back later, rather than take the hit to production described later int the article (without percentages). But then, the latter seems unlikely too, because what is the point of such an agreement?

I guess it all comes down to the intricacies of Korean law, and the tight relationship between businesses, unions, and government.

But having to sue to get your tires? Sorry, it just makes GM look that much worse.

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