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Shareholders of Guangzhou Auto Fick, GAC GROUP and Stellantis have approved a resolution authorizing Stellantis, the world's fourth-largest carmaker, to file for bankruptcy at a loss, according to a notice posted on the website of the world's fourth-largest carmaker. The Stellantis Group made an across-the-board impairment of its investment in Guangzhou Auto Fick and other related assets in its financial results for the first half of 2022. Stellantis Group said that it will continue to provide services to current and future Jeep brand customers in China.

Stellantis Group announcement

Then GAC GROUP issued an announcement, and the directors at the meeting voted to examine and pass the "motion on agreeing to GAC Fick's bankruptcy application." According to the application of the joint venture Guangzhou Auto Fiat Chrysler Co., Ltd. (hereinafter referred to as "Guangzhou Auto Fick"), it agrees that it will apply to the court for bankruptcy in accordance with the relevant provisions of existing laws and regulations.

GAC GROUP announcement

According to the announcement, as of September 30, 2022, Guangzhou Auto Fick (unaudited) had total assets of 7.322 billion yuan and total liabilities of 8.113 billion yuan, with an asset-liability ratio of 110.80%. The assets were insufficient to pay off all debts and obviously lacked solvency. To this end, GAC Feike intends to file a bankruptcy application to the court in accordance with the bankruptcy Law and other existing laws and regulations. GAC GROUP stressed that as of September 30, 2022, the company (including enterprises within the scope of the merger) has formed a total claim of about RMB 1.035 billion against Guangzhou Auto Fick due to the provision of entrusted loans and various business transactions (provision for impairment has been made of RMB 292 million; there is also no more than 200 million yuan earmarked for its staff placement expenses, which is expected to be repaid first at the time of bankruptcy liquidation). The bankruptcy filing of Guangzhou Auto Fick will not have a significant impact on the continued operation of the Company.

In fact, after entering 2022, the development of Guangzhou Auto Fick has been declining. On January 27th, 2022, Stellantis Group announced plans to increase its shareholding in Guangzhou Auto Fiat Chrysler Co., Ltd., a joint venture with GAC GROUP, from 50% to 75%. It also said that "GAC GROUP and Stellantis have agreed to the relevant procedures of the transaction, but still need to be approved by the regulatory authorities." However, this news was denied by Guangzhou Automobile Group. GAC GROUP said: "GAC GROUP learned of its announcement on the equity adjustment of Guangzhou Auto Fick from the official website of Stellantis. This release has not been approved by us, and the two sides have not yet signed a formal agreement on the equity adjustment of Guangzhou Automobile Fick." With regard to foreign joint ventures and cooperation, GAC GROUP will strictly abide by the national policies and regulations and promote it on the principle of mutual trust and win-win results.

On July 18th, Stellantis Group and GAC GROUP jointly announced that the two sides are negotiating to terminate the joint venture in an orderly manner because Guangzhou Auto Fick has been unable to return to normal production and operation since February and has been losing money in recent years. In short, once the termination of the joint venture is settled, GAC Fick will withdraw from the Chinese market. At that time, Stellantis Group announced that Stellantis would adopt a "light asset" approach to develop the Jeep brand in China, and negotiated with GAC GROUP to terminate the local joint venture. After that, Stellantis Group would focus on distributing Jeep-branded imported cars in China. GAC GROUP also responded: "Guangzhou Auto Fick has been losing money in recent years and has been unable to resume normal production and operation since February this year. GAC GROUP and Stellantis are negotiating to terminate the joint venture in an orderly manner and will properly handle matters related to the joint venture in accordance with the law and regulations."

Reviewing the development process of Guangzhou Auto Fick can be described as ups and downs. In the presence of former President Hu Jintao and former Italian Prime Minister Silvio Berlusconi, GAC GROUP Chairman Zhang Fangyou and Fiat Group CEO Marchionne signed a basic agreement to establish a 50:50 joint venture in Rome, Italy, on behalf of Guangzhou Automobile Group Co., Ltd. (GAC GROUP) and Fiat Group. On March 9, 2010, Guangzhou Auto Fiat Automobile Co., Ltd. was formally established by GAC GROUP and Fiat Group with a share ratio of 50:50, with a total investment of about 17 billion yuan, and then the Fiat brand was introduced into China.

In January 2015, Guangzhou Auto Fiat Automobile Co., Ltd. changed its name to Guangzhou Auto Fiat Chrysler Co., Ltd., the Jeep brand was officially localized, and the first model, Free Light, was widely popular in the market, and then the Guangzhou Auto Fick Jeep brand successively introduced models such as the Compass, Free Man and Free Light. The listing of the Jeep brand ushered in a short highlight moment for the development of Guangzhou Auto Fick. GAC Fick sales rose 260 per cent year-on-year to 179900 in 2016, reaching an all-time high; in 2017, sales rose 57 per cent to 222300, but the good times did not last long, and after 2018, GAC Fick sales fell off a cliff. In 2018, Guangzhou Auto Fick's Fiat brand announced its withdrawal from the Chinese market due to poor sales, leaving Guangzhou Auto Fick with only Jeep to develop independently, but in the same year, the Jeep brand was named by the "315 Evening" because of the problem of "burning engine oil". Since then, Guangzhou Auto Fick has also begun to decline. According to the data, Guangzhou Auto Fick sold 125200 vehicles in 2018 and 73900 in 2019.

In this context, GAC Fick also tried to "save itself" by means of capital increase, coach change and new strategy. In August 2020 and July 2021, Fick Group and GAC GROUP jointly injected capital into Guangzhou Auto Fick, with a cumulative amount of 4 billion yuan. On May 10, 2021, the Fiat Chrysler Group announced that GAC Fick appointed Zhu Hengli as the deputy general manager and executive committee member of the company. On July 31 of the same year, with the nomination of Fiat Chrysler Group and the approval of the board of directors of GAC Fick, Mu Anze was appointed as the president of GAC Fick, fully responsible for the operation and management of the Jeep brand in China. In addition, in 2021, Guangzhou Auto Fick also publicly announced that it will launch a new strategy of One Jeep in China, combining Jeep products from previous imported channels with Jeep products from domestic channels to unify the image of Jeep in the Chinese market.

However, after a series of measures, it is still unable to bring substantial growth to GAC Fick. Guangzhou Auto Fick's sales in 2020 and 2021 were 40500 and 20100 respectively, of which sales fell 50.33% in 2021 compared with the same period last year, making it the car company with the fastest decline in GAC GROUP's sales. The sharp decline in sales has also led to the gradual emergence of Guangzhou Auto Fick's operating problems. According to GAC GROUP's financial report, Guangzhou Auto Fick's net worth reached 4.422 billion yuan in 2017, but its net asset fell to-331 million yuan in 2020, with a cumulative loss of nearly 5 billion yuan in three years. GAC GROUP once became the largest "negative equity".

After entering 2022, Guangzhou Auto Fick almost fell into a state of shutdown. taking the first half of 2022 data as an example, Guangzhou Auto Fick's production fell 89% to 822 vehicles in the first half of 2022 compared with the same period last year, and sales fell 84.18% to 1861 vehicles. Among them, the production and sales from March to June were 1, 0, 1 and 0 respectively. According to GAC GROUP's announcement, GAC Fick's operating income in the first half of 2022 was 588 million yuan, compared with 3.861 billion yuan in 2021, with a net loss of 649 million yuan and a net loss of 3.169 billion yuan in 2021. As of June 30, 2022, GAC Fick had total assets of 7.657 billion yuan, total liabilities of 8.186 billion yuan, and an asset-liability ratio of 107%. In short, Guangzhou Auto Fick was "insolvent" in the first half of the year.

In fact, it is no accident that Guangzhou Auto Fick will file for bankruptcy. GAC GROUP said in the announcement that in recent years, due to the decline in product competitiveness and other factors, Guangzhou Auto Fick's production and operation has gradually fallen into difficulties, although Dongfang has taken positive measures and increased capital many times. However, the operating effect has not been improved, and its production and operation has been completely stagnated. At present, GAC Fick has two major plants in China, Guangzhou Panyu and Hunan Changsha, among which the Guangzhou Panyu plant has been taken over by GAC Ean New Energy to produce new energy models after it was closed on September 8, 2021. As for the plant in Changsha, Hunan, it has been reported that Zero and BYD are discussing the possibility of transfer with GAC, but the news has not yet been officially confirmed. The data show that the GAC Fick Changsha plant has a total investment of 5 billion yuan, covers an area of more than 700000 square meters, has a designed annual production capacity of 25-300000 vehicles, and has four complete processes: stamping, welding, painting and final assembly.

Up to now, there is still uncertainty about whether GAC Fick's bankruptcy application can be accepted by the court.

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