BMW’s Chinese partner woes are a warning to rivals

Brilliance China Automotive Holdings

08/09/2022 04:13

(The author is a Reuters Breakingviews columnist.  The opinions
expressed are his own.)
    By Pete Sweeney
    HONG KONG, Sept 8 (Reuters Breakingviews) - The German
carmaker’s local counterpart said its indebted state-backed
parent siphoned $1.6 bln in funds. Fortunately BMW just took
control of the joint venture and looks insulated. For foreign
peers mulling similar moves, the scandal sends a message: hurry
up or hurry out.
    Full view will be published shortly.
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    CONTEXT NEWS
    Hong Kong-listed Brilliance China Automotive disclosed on
Sept. 2 the results of a third-party forensic investigation that
showed the company had provided “unauthorized financial
assistance” and loan guarantees worth 11 billion yuan ($1.6
billion) to its state-owned parent company Huachen Automotive
Group in 2020 and 2019. It gave similar assistance to several
other counterparties. 
    The overall result of the “unrecorded or improperly
recorded” fund transfers was a net outflow of 1.7 billion yuan,
the investigation found. None were reported to the board of
directors of the company.
    Trading in Brilliance China has been halted since March 2021
after it delayed publishing 2020 financial results. 
    In February, BMW paid 3.7 billion euros to increases its 50%
stake in its Chinese joint venture with Brilliance Auto Group to
75%.

 (Editing by Robyn Mak and Thomas Shum)
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