[Exclusive] Hyundai Motor Supplier Doowon Precision Industry, with a '52-Year History,' Ultimately Declared Bankrupt

Once recording an annual revenue of 200 billion KRW and leading the domestic diesel auto parts industry, Doowon Precision Industry is closing its doors after 52 years since its establishment. As its last hope of a merger and acquisition (M&A) fell through amid a corporate rehabilitation process (court receivership) that dragged on for over two years, the court declared bankruptcy.

On the 29th, the 1st Division of the Suwon Rehabilitation Court announced that it had declared Doowon Precision Industry Co., Ltd. bankrupt on the 26th.

50 Years of Glory Fade Away with the 'Decline in Diesel Vehicle Demand'

Starting in Anseong, Gyeonggi Province in 1974, Doowon Precision Industry boasted unrivaled technological prowess in the field of fuel injection systems for diesel engines. Having formed a technical tie-up with Germany's Bosch, it had supplied core components to leading domestic automakers and heavy equipment companies such as Hyundai Motor Group and Hyundai Infracore. Building upon a broad portfolio ranging from export vans to excavators and agricultural machinery, it once surpassed 200 billion KRW in revenue, establishing itself as a solid mid-sized enterprise.

However, the company's fortunes began to decline as the 'post-diesel' trend accelerated due to tighter global environmental regulations from the mid-2010s onward. Amid the massive wave of transition to eco-friendly vehicles, demand for diesel parts plummeted, and the company's profitability went on a downward spiral.

Labor-Management Conflicts and Lawsuits... Missed the Golden Time for Rehabilitation

To overcome its financial difficulties, the company attempted several restructurings, but labor-management conflicts held it back. In 2018, it filed for bankruptcy due to financial distress but seemed to overcome the crisis by withdrawing the application following a labor-management agreement; however, it failed to achieve a fundamental structural improvement.

Instead, the conflict escalated into a legal battle. In a lawsuit claiming unpaid wages filed by 69 former and current employees, the court ruled in June 2023 that "the company must pay 3.2 billion KRW," adding fuel to the liquidity crisis. Unable to hold out any longer, Doowon Precision Industry applied for rehabilitation procedures again at the Suwon Rehabilitation Court in July 2023, shortly after the ruling.

After entering court receivership, the company made desperate efforts to find a new owner through a 'pre-approval M&A.' In March of this year, it selected Samil PwC as the lead manager for the sale and pushed for a public sale, but it was reported that no buyers were found due to the opaque outlook of the diesel auto parts industry. Ultimately, as it failed to find a suitable buyer even after the rehabilitation plan was approved, the court appears to have determined that there was no possibility of rehabilitation and decided on bankruptcy.

Losses for Investors, Including Taeyang Machinery, Inevitable

With this bankruptcy declaration, a financial blow to Taeyang Machinery, a Konex-listed company and a major shareholder of Doowon Precision Industry, is expected to be inevitable. Taeyang Machinery holds a 43.78% stake in Doowon Precision Industry. According to the industry, Taeyang Machinery is estimated to have valued the enterprise at about 9.9 billion KRW at the time of stake acquisition and acquired management rights for 4.3 billion KRW. (The acquisition price for the management rights was 4.3 billion KRW, which increased to 8.6 billion KRW reflecting equity method gains, and was later reflected as 7.6 billion KRW in acquisition cost excluding losses when it was reclassified as 'available-for-sale securities' after receiving a 'disclaimer of opinion' from auditors.)

After settling secured creditors with priority repayment rights and wage claims, the share returning to shareholders is highly likely to be small. The court plans to sell the company's remaining assets through a bankruptcy trustee and distribute the dividends to creditors in the future. Information on the sale of major assets will be announced through the Supreme Court's website.