China Labour Bulletin is quoted in the following article. Copyright remains with the original publisher
31 July 2013
SHANGHAI—A tire plant in eastern China is poised to change foreign owners, but the takeover isn't sitting well with the more than 5,000 Chinese workers employed at Cooper Chengshan (Shandong) Tire Co.
The workers are continuing with a strike they began on July 13, said a spokesman at Chengshan Group, a state-run tire maker that owns a 35% stake in Cooper Chengshan. The majority owner is U.S.-based Cooper Tire & Rubber Co.
Cooper Tire said on June 12 that it would be bought by India's Apollo Tyres Ltd. for $2.5 billion, as the two tire makers sought to bulk up to compete with bigger global rivals.
Workers at the Cooper plant in China are concerned in part about the Indian company's ability to repay debtas well as the cultural differences between China and India, said the union. "We will persevere in the end," said Liang Yiting, a union leader at Cooper Chengshan. "Apollo has such a high-debt ratio. We are very concerned about our future."
Sunam Sarkar, chief financial officer at Apollo Tyres, said Cooper Tire management is explaining to the Chinese workers that the deal is financially beneficial to all parties. "Our understanding is the Cooper management is working to resolve the situation and we expect it to be resolved at the earliest," he said. Meanwhile, the strike has halted production at the plant.
Apollo, which is about half the size of Cooper in terms of revenue, will take on $450 million in new debt to finance its $2.5 billion offer. Cooper Tire also will take on $2.1 billion of debt, largely through a bond offering. The U.S. company will issue $1.9 billion in bonds with a maturity of around seven to eight years. Mr. Sarkar said in June the bonds' interest rate is expected to be between 6.75% to 9.5%.
Work disputes are on the rise in China amid concerns about the country's slowing economic growth, though causes of disputes depend on individual circumstances. The labor group China Labour Bulletin said in June that it recorded 201 cases of labor disputes, including strikes, in China in the first four months of the year. That was almost double the number in the same period last year.
The incident at Cooper Chengshan is a reminder that parties to large mergers increasingly must consider a deal's effect on Chinese employees, analysts say.
In 2011, PepsiCo Inc. plant workers struck in eastern China after the U.S. snack and soft-drinks company announced China's Tingyi Holding Corp. would take over its bottling operations in the country. The workers said they worried their jobs were at risk and conditions would sour with a new employer. The Pepsi deal eventually went through after the companies assured workers their contracts wouldn't change.
"They just told us that you would be sold to Apollo. No communications before and after that," said Cooper Chengshan union leader Mr. Liang.
Experts say a proposed deal provides an opportunity for Chinese workers to gain leverage with management to claim better work conditions or job guarantees. "Don't assume they are going to be passive," said Jeffrey Wilson, a labor specialist in Shanghai at law firm Jun He. "They don't really have confidence they will be retained."
More globalized Chinese industries means the risk cuts the other way. When China's Sany Group Co. in 2012 announced a deal to buy German rival Putzmeister Holding GmbH, the news triggered strikes among workers of the target company in Europe. The buyer assured the workers Putzmeister would remain an independent brand and the transaction was ultimately completed.
A protest on June 21 by workers at Cooper Chengshan led to talks between the Chinese and the Americans in late June. But they didn't yield results. Neither did three-party talks in July among Cooper Chengshan's work union, Cooper Tire and Apollo, according to statements posted on Chengshan Group's website.
The dispute also comes as China and India have vowed to boost trade. In his visit to India in May, Chinese Premier Li Keqiang expressed a willingness to help Indian companies access China's market.
"We oppose this purchase also because Apollo is an Indian company," said Mr. Liang, adding, "if it was Michelin, we might have agreed."
China's growing integration with the rest of the world means it plays a greater role in global deals. Earlier this year, Glencore International PLC agreed to sell a $5.2 billion copper project in Peru to meet Chinese regulatory approval for its merger with Xstrata PLC. Japan's Dentsu Inc. waited roughly nine months for Chinese regulatory approval before it could complete its deal for Aegis Group PLC.
—Rose Yu and James T. Areddy in Shanghai, and Santanu Choudhury in New Delhi contributed to this article.