A yearlong negotiation between creditors of Kumho Tire and Qingdao Doublestar hit a major snag on Tuesday, as the former group rejected the Chinese company’s demand of cutting down its bid price for a controlling stake in the South Korean tiremaker.

If the Chinese firm refuses to renegotiate, the deal is terminated automatically.

“We were not able to accept, because Doublestar made an excessive demand,” said an official representing one of the creditors, including the state-run Korea Development Bank

Doublestar has signed a contract with the creditors to buy a 42.01 percent stake in Kumho Tire for 955 billion won ($844 million). The Chinese firm has been demanding the creditors to cut 16 percent of the sale price to 800 billion won, citing the company’s falling profits.

The two sides have been also locking horns over the issues of securing jobs for existing Kumho Tire employees and keeping the tiremaker’s production units in South Korea.

Creditors also agreed to request Kumho Tire management to submit a self-rescue plan for the company reportedly in a liquidity crisis.

They would fire CEOs at Kumho Tire including Kumho Asiana Group Chairman Park Sam-koo if the company does not come with proper plan to increase profit, officials said.

The decision came a day after South Korean Industry Minister Paik Un-gye making unusual comment widely interpreted as supporting the Kumho chairman’s wish to buy back the tire unit.

The minister told reporters Monday evening that even if the creditors accepts Doublestar’s demand of cutting down the sale price, Park would be given the first opportunity to buy back or reject the offer. Paik also added that the chairman forming a consortium “one way or another” would be the best scenario for Kumho Tire.

The comment drew fire as it gave the impression of the government intervening in the case. The ministry refuted the report, saying that Paik was only trying to explain the legal procedure of selling a defense industry company to a foreign entity.

The tiremaker is categorized as a defense industry company as it manufactures tires for fighter planes. The minister of industry holds the final right to approve the sale of a defense-related company.

By Cho Chung-un (christory@heraldcorp.com)