YANGSAN, South Korea—Woosung Tire Corp. is entering the new century with a new name, a better fiscal outlook and the first capital improvements since its financial problems came to a head in 1996. The new name, Nexen Tire Corp., means "next century." After a decade of being in the red, the company emerged from court-ordered receivership last year and reported an operating profit in 1999 for the first time since 1990, new President and CEO Kenneath S. Rhee said.
The newfound financial stability largely results from the infusion of capital from South Korean inner tube maker Heung Ah Corp. That development will allow Nexen to invest about $20 million this year in capital improvements and double spending on research and development, while also making the company more attractive for a possible strategic alliance with a foreign tire maker, Mr. Rhee said during an interview at Nexen's headquarters in Yangsan.
The $20 million in capital spending is the first practical investment at the company since it filed for protection from creditors in 1996, he said. Following this initial outlay, Nexen plans a second phase of expansions next year.
R&D spending almost will double to 3 percent of sales, and the number of key staff positions in the unit will increase 60 percent to 40. Nexen's four major R&D projects serve as a backbone for a new management campaign, START 21—Strategy & Tactics, Activities and Reliability backed up by Technology—Mr. Rhee said.
Woosung lowered its debt ratio to 73 percent of sales last year from nearly seven times sales in 1992, and cut its financial costs to 2.5 percent of sales in 1999 from 37.8 percent in 1992.
Nexen's sound financial structure came mainly from a steady increase in investments last year. Heung Ah—in competition with at least four other interested parties—paid $25 million in August for a 75.9-percent ownership stake in Woosung. In addition, the tire maker's creditor banks wrote off $130 million in debt and converted another $5.4 million to capital.
Meanwhile, other investors have stepped forward—including one unnamed U.S. investor group that now owns 18 percent—reducing Heung Ah's ownership to 57.9 percent.
"Given all these, the change of our company name is just a turning point in spurring up the forward drive," said the 52-year-old Mr. Rhee, who was a president with Heung Ah before taking the reins at Woosung/Nexen last year.
Mr. Rhee said Woosung/Nexen's record of financial improvement can't be matched by any other tire and rubber company in the world. "A new naming of a corporate identity is, thus, regarded as a `must' to break an old image of a financially dishonored company," he said.
As a newborn company with a totally different capital structure from Woosung, Nexen is aiming high with new technologies and pattern designs, with patents pending in many countries.
Management wants to claim more than 10 percent of the South Korean domestic market this year.
Last year Woosung's exports exceeded $100 million, representing 75 percent of total sales. However, as overall sales rise, the export ratio will fall to 60 percent, despite an expected increase in export sales to $120 million this year, Mr. Rhee said.
Nexen regards a mutually beneficial strategic alliance with a foreign tire maker the best survival policy in and environment of cutthroat global competition.