The deal sounded good on the surface: Cooper Tire & Rubber (NYSE:CTB) would merge with India's Apollo Tyres in a $2.5 billion deal, through which shareholders would receive $35 per share for their stake, a 43% premium to where the stock was trading prior to the June announcement. But where the rubber met the road, the wheels seemed to come off the transaction.

The United Steelworkers union representing 2,500 Cooper workers at two plants filed a complaint with an arbitrator saying Cooper and Apollo weren't living up to the terms of the labor contract with the U.S. tire maker, which included a "successorship clause" that requires a buyer to recognize the unions and negotiate a new labor agreement prior to completing a sale. 

United Steelworkers is concerned the mountain of debt Apollo will pile onto Cooper to finance the acquisition will leave it unable to pay union workers' pension obligations down the road. In a decision handed down last month, the arbitrator sided with the union and said Apollo had to abide by the terms of the labor contract.

Additionally, the merger announcement created a stir at Cooper's plants in China -- one went on strike and another sued the company, also citing concerns about the debt. Its Cooper Chengshan (Shandong) Tire subsidiary is also refusing to build Cooper-brand tires and has locked management out of the factory and from accessing its financial statements.

As the deal ground down, Cooper went to court to force Apollo to come to an agreement with the union, but Apollo scoffed and questioned how Cooper could expect the deal to move forward when it has no effective control over its subsidiary. Cooper hasn't provided the documents it needs to complete the deal, so Apollo wants to cut its offer by at least $2.50 a share because of all the trouble, maybe even slashing the price by as much as $9 a stub. 

Good thing this is a friendly takeover. 

If the two do pull off the deal -- Cooper's management still says the synergies of the merger make sense despite the differences -- it will create the seventh-largest global tire maker, with pro forma revenues of $6.6 billion in 2012. However, it will still be dwarfed by rivals like world's No. 1 tire maker Bridgestone, which has $31 billion in annual sales; Firestone, with $26 billion; and Goodyear Tire, at $21 billion.

Recording $3.9 billion in trailing sales of its own, Cooper remains primarily a U.S.-based tire maker, with 70% of its revenues generated here at home. The merger would provide an opportunity to enter international markets such as India, Africa, and Latin America, but at the same time also give Apollo entry in the U.S. market.

Of course, all that is predicated on the deal going through. At the moment that appears to be up on blocks.

Fool contributor Rich Duprey has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.