Friday, June 20th, 2014
SEOUL, KOREA - The Kumho Tire plant in Nanjing, Jiangsu Province, has been requested by the city government to relocate its plant as part of a plan to move 173 pollution-causing manufacturing plants out of the city. The company decided to move the plant by the end of this year, but it has had difficulties negotiating compensation amount.
Several Korean companies doing business in China are facing a crisis as the Chinese local governments are forcing them to move away from city centers. The Fuzhou plant of LG Innotek and the Suzhou plant of GS Caltex were recently asked by the local government to relocate their factories. A Korean source in China said, "Recently several Korean operations in Tianjin were given notices to move their manufacturing sites within the city."
The problem is it is hard for them to find alternative sites out of the cities and almost impossible to get compensation from the local government. For example, Kumho Tire has negotiated for more than two years for compensation volume, but the price differential between the asking price and the compensation price offered by the government was more than 1 billion yuan (US$160 million).
Another issue is how to recruit experienced workforce after the move. For this reason, some Korean companies that have been notified of moving are reviewing an idea of relocating to a Southeast Asian nation entirely.