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This was in the news for two weeks already. It so happened that the Ohio-based Cooper tires has accepted a buyout offer from Apollo Tyres from India. The Chinese venture between Cooper and the Chinese counter-part in Shandong of which 65% owned by Cooper.

Usually investment in China was supposed to be an opportunity, in this case Cooper’s investment in China was used as one of the primary attractions behind the ambitious deals for Apollo. If completed, the transaction would be the largest ever Indian acquisition of a US company.

Apollo Tyres is trying to acquire a larger US rival in a highly leveraged take-over deal. It was on June 12, Apollo announced about the agreement that it had reached with Cooper for the $2.5 billion acquisition.

Sunam Sukar, Apollo’s chief financial officer told the analysts that Cooper’s 65% ownership of the joint venture in China’s Chengshan Group in Shandong is also the extensive distribution network in China. The acquiring of Cooper will allow Apollo the immediate access for the strong distribution network in North America and China and it is a perfect match for Apollo’s existing presence in India, Europe and Africa.

Now the workers and the management of Chengshan are concerned with the highly leveraged buyout by Apollo, as the deal was entirely funded by debt, and most of which will sit on Cooper’s books. India’s recent falling of the bond market and rupee are adding to the unease, and this is being shared by some analysts already.

5,000 Chinese workers are creating the resistance by strike and the disrupting actions been taken. Denying access to certain representatives of the company and withholding certain business and financial information are forming part of the disruption. Earlier on the stopping of the production lines for the Cooper tires have taken effect as one of the union actions.

Unlike the previous high-profile dispute between the Chinese employees with the foreign investors as this one has no dispute over the pay. The Chinese workers also took the reason of the different of the cultures and they explained that it took them many years to get to learn and to work with the Americans. They have their reservation for the management style of India which will take another long learning process.

It even went further for the union to take on a paid-advertisement in the Wall Street Journal by announcing that they would resume production of Chengshan tyres but pledged to boycott work on Cooper products.

The deal has now raised concern with Cooper’s union workforce and the arbitrating hearing will involve.  

The shareholders will vote on the transaction on September 30 and the deal will have to be completed by the end of the year.

 

Acknowledgement:

Financial Times Tuesday, August 20, 2013

Financial Times Saturday, August 31, 2013

 

 An Lu’s comment:

This would set the milestone for the foreign investments in China and the use of the union’s strength for the bargaining, the involving of the international union organization and the lock out of the foreign investors are alarming.

Concerns over the leverage of the debts and the equity, the insecurity of the jobs and the crash of the cultures are not groundless.

This lead to the deeper thought how the unionized workers come to have all these information and the taking up of the labor action to try to bring the corporate to their knees.