On October 31, Netherlands-based automaker Stellantis announced that the GAC-FCA, a joint venture established by Stellantis and China’s GAC Group, will file for bankruptcy in court.
Stellantis fully impaired its long-term investment in GAC-FCA and other related assets, its financial results for the first half of 2022 showed. The company said that it will continue to provide quality services to existing and future Jeep brand customers in the Chinese market.
On July 18 this year, GAC officially announced that GAC-FCA has been in a state of loss and has been unable to resume normal production and operation since February this year. As a result, GAC and Stellantis jointly decided to terminate the joint venture. Stellantis issued a statement at that time, saying that it will adopt an asset-light approach to develop its Jeep brand in China. In the future, the company would only keep the import business of Jeep brand in China and strengthen its new energy product lineup.
On March 9, 2010, GAC-FCA was jointly invested and established by GAC Group and Stellantis with a 50:50 share ratio, with a total investment of about 17 billion yuan ($2.33 billion). In 2016, with the help of three SUV models, namely, Compass, Renegade and Cherokee, the sales volume of GAC-FCA increased by 260% year-on-year to 179,900 units.
However, two years later, GAC-FCA went downhill due to their vehicles requiring a large amount of fossil fuel consumption for which the Jeep brand was criticized by Chinese regulators. From 2018 to 2021, the sales volume of GAC-FCA decreased from 125,200 units to 20,100 units. In the first half of this year, Jeep almost shutdown, with only one unit of production and sales in March and May, and zero production and sales in April and June.
According to GAC, the operating income of GAC-FCA in the first half of this year was 588 million yuan, compared with 3.861 billion yuan in 2021, while the net loss was 649 million yuan, compared with 3.169 billion yuan in 2021. As of June 30, 2022, GAC-FCA had total assets of 7.657 billion yuan and total liabilities of 8.186 billion yuan, which made its asset-liability ratio hit 107%.
The key factor of GAC-FCA’s decline lies in the competition for the right to speak between the two sides of the joint venture, which led to inefficient decision-making and an inability to introduce new products. On January 27 this year, Stellantis unilaterally announced that it planned to increase its shareholding ratio in GAC-FCA from 50% to 75%. Subsequently, GAC said that “this behavior has not been approved by us.”
In August this year, Carlos Tavares, CEO of Stellantis Group, revealed at the financial report conference that GAC did not want to abide by the binding memorandum of understanding signed by the two companies, which eventually broke the trust between the two parties. GAC claimed that the remarks were “incredible”, saying that the main problem of the breakdown of cooperation was that Stellantis lacked respect for customers in the Chinese auto market.
A GAC-FCA employee told Jiemian News that both parties don’t want to take responsibility, and both want to make decisions, so they can’t reach an agreement on many issues. Stellantis wants more equity, but GAC wants to switch to new energy vehicle production and make use of all types of resources.
In terms of asset disposal of GAC-FCA, its global advanced factory in Panyu District of Guangzhou has been officially transferred to GAC Aion. It has been reported that GAC-FCA’s Hunan Factory will be taken over by BYD, but it has not been officially confirmed.