Source: Visual China

The shareholders of the GAC-FCA Joint Venture, Guangzhou Automobile Group Co., Ltd. (GAC) and Stellantis have approved to authorize the loss-making venture to file for bankruptcy, according to a Stellantis’ statement on Monday. Stellantis said it has fully impaired the value of its investment in the GAC-FCA JV and other related assets in its financial results during the first half of the year. The Italian-American conglomerate vowed to continue providing quality services to existing and future Jeep brand customers in China.

The announcement of bankruptcy is not a surprise since Stellantis suddenly unveiled in July that it had been in talks with GAC about how to terminate its joint venture producing Jeep vehicles, a U-turn after the world's No.4 carmaker said in January that it was planning to increase its stake from 50% to 75%.

Stellantis’ statement in July said its discussions for termination due to lack of progress in the previous plan to take a majority share of the venture, and it would recognize a non-cash impairment charge of approximately €297 million in first half 2022 results. While admitting it’s better for it to close the venture, Stellantis stressed its focus on distributing imported vehicles for the Jeep brand in China, so as “to leverage the potential of the brand and its iconic products through an asset-light approach”.

The GAC-FCA venture was founded in March, 2010, with Stellantis and GAC each holding 50% of stake. Its sales have peaked to more than 200,000 units in 2017, when the brand Jeep saw annual sales of 1.4 million. However, recent years witnessed the venture’s sharp decrease amid the pandemic lockdowns and increasing competition from electric vehicles, even two shareholders added a total of RMB4 billion spending in it for its turnaround plan in less than one year as of July 2021. Production of the venture has basically stagnated since February, 2022 as its sales in March has only one vehicle and further fell to zero in following months.  

According to GAC, the venture posted revenue of RMB588 million and net loss of RMB649 million in te first half of 2022. Its debt-to-assets ratio reached 100.80% as of September 30, 2022, with total assets worth of RMB7.322 billion and debt of RMBRMB8.113 billion.

Failure of the venture mainly resulted from disagreements among two shareholders as each of them is keen on making the decision but neither likes to shoulder the responsibility of losses, a staff at the venture told Chinese media outlet Jiemian. GAC opposed Stellantis’ intention to acquire more stakes to fully control the venture, while Stellantis disagreed its Chinese partner’s seeking production transition to new energy vehicles, the person noted.

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