Group Michelin will purchase 10 percent of Hankook Tire Co. Ltd.'s share capital and bring the South Korean tire maker into the fold of its run-flat tire/wheel technology as part of a new agreement between the two companies.
The partnership-announced and signed in Seoul Jan. 28-will include cooperation in research and development, manufacturing and distribution, Michelin said. In coming months, the firms will ``work in order to define the precise scope and terms of the specific joint programs'' and their collaborative efforts will develop, the French tire maker said in a release.
Hankook and Michelin said the partnership would be implemented in specific phases, though there is no timeline as of yet.
Via the agreement, Michelin will become a shareholder in Hankook by acquiring 10 percent of the company's total share capital. Terms of the deal were not disclosed, but Greg Melich, an analyst with Morgan Stanley & Co. Ltd. in London, estimates the stake cost to be about $35.7 million.
The key elements of the alliance will be the licensing of Hankook with Michelin's Pax run-flat tire/wheel system and an agreement between the firms for Hankook to make tires for Michelin. Goodyear, Sumitomo Rubber Industries Ltd. and Pirelli S.p.A. already are Pax partners with Michelin.
The two companies also plan to work together to optimize their respective product distribution in selected markets, Michelin said.
``Hankook and Michelin share many perspectives which we believe constitute a strong foundation for our partnership,'' said Jean-Marc Francois, president of the Michelin Asia-Pacific segment and Hankook CEO and President Choong-Hwan Cho, in a joint statement from Seoul.
Mr. Francois-also a member of Michelin's Group Executive Council-said the Hankook deal is ``yet another step'' in Michelin's development plans for Asia. The company already has a presence in Japan, Thailand and China.
Michelin told shareholders in 2000 that it intends to become the No. 2 tire maker in Asia by 2005; to do so, the company must more than double its sales base there, according to estimates of its Asian presence. Asia accounts for less than 10 percent of Michelin's global sales, although this would represent nearly $1 billion in sales.
Michelin's most recent move into Asia was its purchase of a controlling stake last year in the Shanghai Warrior tire operation in Shanghai, China. The company-Shanghai Michelin Warrior Tire Co. Ltd.-is a joint venture with Shanghai Tyre Co. Ltd.
The Hankook partnership likely will strengthen Michelin's presence in Korea, Mr. Melich said, as well as at the low-end of the U.S. market. Manufacturing in Asia complements the European and North American base, he said.
Mr. Cho added that for Hankook, the Michelin alliance will play an important role in his company's growth into one of the major players in the global tire business.