Stellantis' Jeep JV in China to file for bankruptcy

Stellantis’ Jeep JV in China to file for bankruptcy

The Jeep logo at the 2022 Paris Motor Show

The Jeep logo at the 2022 Paris Motor Show

(Reuters) – The Chinese joint venture between Stellantis and Guangzhou Automobile Group Co (GAC) that produces Jeep vehicles will file for bankruptcy, the two groups said on Monday, reflecting the slow decline of the oldest foreign car brand in the world’s leading automotive market and Stellantis’ new strategy in China.

In a statement, Stellantis said it “completely wrote off the value of its investment in the GAC-FCA joint venture” in its financial results for the first half of 2022. It would continue to serve Chinese customers of the Jeep brand.

GAC, which approved the bankruptcy filing, said the joint venture had financial liabilities accounting for nearly 111 percent of its assets of 7.3 billion yuan ($1 billion).

Stellantis ended the joint venture in July, just a few months after announcing its intention to increase its stake in it from 50% to 75%.

The two partners had passed the buck on this divorce, Stellantis General Manager Carlos Tavares believed that GAC had broken the relationship of trust between the two groups while GAC had declared itself “deeply shocked” by these comments.

In mid-October, at the Paris Motor Show, Carlos Tavares reiterated that today it was very difficult to project himself in China due to the uncertainties about the country’s relations with the rest of the world.

The manufacturer, born from the merger between PSA and the Italian-American FCA, has not ruled out generalizing an “asset light” model in China, substituting the manufacture of cars in factories maintained in JV or in its own name by subcontracting or import contracts. .

“In order to prepare for this new post-JV step that will allow the Jeep brand to continue serving its customers in China, a product roadmap detailing the models available for the Chinese market will be made public soon,” said a statement. spokesman. Reuters group speech.

Stellantis will import Jeep models for its Chinese dealers as it already does for Maserati and Alfa Romeo.

Unlike other manufacturers such as Volkswagen, which are multiplying investments in China, Stellantis has turned its back on a strategy that, for a time in the last decade, aimed to reach a production capacity of one million cars a year with several new factories. . .

The geopolitical factor has added to the group’s difficulties in dealing with competition from local brands. Thus, the former PSA has seen Chinese sales of the Peugeot and Citroën brands plummet for several years in a row, while the JV with GAC, which marketed the Jeep Cherokee and Compass, has followed the same path for the last four years.

Since the beginning of 2022, the joint venture has sold fewer than 2,000 cars, compared to 20,396 in 2021 (already down 50 percent). In May, only one Jeep vehicle found a buyer.

“It had every chance of succeeding in a market that has itself embraced the SUV craze,” said Bill Russo, who runs Shanghai-based consultancy Automobility Ltd. “But we cannot manage a business model inherited from the 1980s in the 21st century.”

Carlos Tavares pointed to the growing “political influence” of the Chinese authorities in the matters of joint ventures between Chinese and foreign companies. He is also a strong supporter of reciprocity between customs duties on Chinese car imports in Europe and those levied by China on foreign vehicles exported to the Chinese market.

(Juby Babu in Bangalore, Zhang Yan in Shanghai and Norihiko Shirouzu in Beijing, with Giulio Piovaccari in Milan, Kevin Krolicki, and for the French version Gilles Guillaume, edited by Kate Entringer and Matthieu Protard)

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