False reporting and incomplete disclosures have led China’s securities regulator to fine Huachen Automotive Group Holdings and some of its executives a total of nearly $9 million.
The company owns Brilliance China Automotive, BMW‘s main Chinese partner. Together, the companies formed BMW Brilliance Automotive under China’s requirement that foreign automakers partner with local companies.
BMW Brilliance accounts for nearly all of Brilliance’s profit, per Reuters. As Huachen Automotive Group sought to launch its own automotive brands, it sank deeply into debt. In 2020, the company defaulted on 6.5 billion yuan (a little over $1 billion USD) in debt last year.
Last week, though, Brilliance China Automotive revealed that its subsidiaries had guaranteed 5.89 billion yuan ($905 million) in Huachen bank loans without authorization, according to Nikkei Asia.
Read More: BMW China Partner’s Parent Company Facing Debt Issues
The subsidiaries, auto parts maker Shenyang Jinbei Automotive and auto distributor Liaoning Shenhua Holding, separately reported that Huachen, the parent company, had inflated its profits in 2017 and 2018.
The inflated results obscured falling sales and were the pretense on which Huachen raised 12.9 billion yuan ($1.9 billion USD) in bond issues on the Shanghai Stock Exchange and the Interbank Market.
China’s securities regulator also found that Huachen had failed to make timely and proper disclosures of changes in its credit rating, missed payment deadlines, litigation and arbitration cases, and other matters that might have affected the value of its bonds.
It has therefore fined Huachen 53.6 million yuan ($8.2 million USD), while 12 former and current former executives got 2.98 million yuan in other fines. ($460,000 USD).
BMW’s China chief, Jochen Goller, told reporters at Auto Shanghai 2021 that Huachen’s issues would not impact BMW Brilliance China. In February, Reuters reported that BMW was looking to buy another 25% of the joint venture, though the purchase was supposed to take place in 2022.
