Guangfeike applies for bankruptcy for 300 days: Million car owners become "orphans"

In December 2022, Li Gang, the owner of Jeep in Hebei, drove a Grand Commander car that malfunctioned, with water leaking from the water tank drain pipe and oil leaking from the left rear shock absorber. The water tank is filled with coolant. If the water leakage is not solved for a long time, the engine temperature will be too high, and problems such as boiling, cylinder pulling, and valve stem breakage may occur.

Because the vehicle is still under warranty, Li Gang filed a claim with the 4S store, who also sent the claim work order to the manufacturer, but could not wait for the parts. Li Gang called the manufacturer's 400 customer service several times and always replied that he would provide feedback to the manufacturer, but there was no follow-up.

It wasn't until June of this year that the manufacturer sent the parts to the 4S store, and Li Gang's unused car, the Commander in Chief, was able to resume operation. Li Gang's experience is not the most tragic. Another Jeep owner in Hebei had an accident last month, and the vehicle chassis was damaged. The 4S store informed him that there were no parts and he couldn't come up with a solution. "The 4S store said, 'I can only think of a solution myself. If I'm lucky enough to find the parts and fix them, I can still continue driving. If I'm lucky enough, I can't find the parts, fix them, and the car won't be able to drive.'".

Due to a long-term shortage of accessories, sellers in the "black market" who make dismantled or auxiliary parts appear like sharks smelling blood. A front bumper that was originally priced at two to three thousand yuan can be priced at 40000 to 50000 yuan. If the front and rear bumpers are replaced together, it would cost 70000 to 80000 yuan, which is enough to buy a brand new Buick or Nissan sedan.

"Since the bankruptcy of Guangfeike, I have become much more civilized in driving. I am afraid of accidents, and without accessories, I cannot afford repairs," said a Jeep owner.

On February 6th this year, Stellantis Group announced through its official Weibo account that it will provide daily maintenance and after-sales services for Jeep brand domestic vehicles, Fiat brand domestic vehicles, and Fiat brand imported vehicles produced and sold by Guangfik from now on. According to the sales data disclosed by the manufacturer, since the establishment of Guangfeike in 2010, the number of Jeep brand customers in China has reached 950000, and with the previously imported Jeep vehicles sold, the number of customers in China has exceeded 1 million.

According to the "Automobile Three Guarantees Policy" issued by the General Administration of Quality Supervision, Inspection and Quarantine of China and the "Automobile Sales Management Measures" issued by the Ministry of Commerce, if a company goes bankrupt, its automobile after-sales service must meet the needs of users for after-sales service 10 years after the cessation of vehicle production.

However, based on feedback from car owners in different provinces and cities across the country, information from major complaint platforms such as the Automotive Complaints Network, communication groups for dealer spare parts nationwide, and information obtained from journalists calling Jeep 4S stores in more than 20 provinces and cities across the country, there are varying degrees of missing parts for both imported and domestic Jeep models.

"We are like a group of homeless children, without any accessories, driving disposable cars," said a Jeep owner in a group.

At the same time, creditors such as suppliers with a total debt of 8 billion are anxiously waiting for the progress of Guangfeike's bankruptcy liquidation. Dozens of dealers intend to sue Chrysler China, and their authorized operating contracts were originally due to expire at the end of this year. But since the end of last year, Chrysler China has stopped supplying vehicles and there has been a significant shortage of spare parts, making dealers the focus of customer complaints.

And these are the ordinary days experienced by car owners and dealers nearly 300 days after Guangfeike announced bankruptcy.

Millions of car owners become "orphans"

In multiple Jeep car owner groups with a total population of over 1000 people, owners have reported that it takes at least one or two months to replace a component, and waiting for six months is common. There are also some parts that have been waiting for a year but have not arrived.

A Jeep owner in Hubei, Wang Feng, told reporters that he purchased the new Grand Commander two wheel drive luxury version at the end of June last year, with a landing price of nearly 240000 yuan. At the end of September last year, a vehicle accident occurred, with partial damage to the front bumper and grille. The car insurance company went through the process of replacing parts. At that time, Guangfeike had already announced the termination of operation, and the staff of the 4S store in Wuhan also claimed that the manufacturer did not have any parts, asking him to wait for the news. During this time, the 4S dealership secured the damaged front bumper of the vehicle with straps. Although there were some hidden dangers, careful driving still allowed for continued use.

At the end of 2022, the Wuhan Jeep 4S store that provided services was shut down and Wang Feng's repair business was transferred to a nearby Land Rover 4S store, which will follow up on the subsequent parts repair business.

"The staff at the Land Rover store were also very responsible in following up on this matter. One day, the staff told me that they had received the front bumper from the manufacturer, and I was overjoyed. Within a few days, they suddenly contacted me and said that they had taken the wrong parts. It was the old front bumper, and the new parts still couldn't be received from the manufacturer," Wang Feng said.

At the same time, the shortage of Land Rover Commander's accessories has caused a stir, and some parts with unknown origins have begun to appear on a second-hand trading platform, some claiming to be dismantled parts, and others claiming to be secondary and original parts. Regardless of the source, the price is surprisingly high. The normal price of a front bumper without an assembly is around 2000-3000 yuan, but on second-hand trading platforms, the price is usually quoted between 30000 and 50000 yuan, and the price varies every day. Whether you can get the goods depends on your speed and fate. If it is a front and rear bumper with an assembly, the total cost of replacement is close to 90000 yuan, which is enough to buy a used Grand Commander or a brand new compact sedan from a joint venture brand.

Wang Feng's vehicle was assessed based on the price of normal spare parts before the bankruptcy of Guangfeike, with a total cost of less than 5000 yuan. Unfortunately, the staff at the Land Rover store suggested that he use the assessed cost for routine maintenance. From the accident at the end of September last year to September this year, for a whole year, Wang Feng's commanding officer was driving on the road with bandages tied up.

Coincidentally, a Jeep owner from Shenzhen showed reporters that he had damaged the vehicle's rear door and bumper due to lack of parts, and the car has not been repaired since the end of last year until today.

A Jeep owner in Northeast China told reporters that his vehicle's airbag controller has malfunctioned due to the lack of original spare parts. Three dismantled parts were replaced but cannot be repaired. Some car owners have shown pictures to reporters that the fault light on their vehicle's dashboard has been on for a long time, and cannot be repaired due to accessories or service capabilities. They can only drive vehicles with the fault light on for a long time.

Several interviewed car owners told reporters that the most severe shortage of Jeep brand products currently is the appearance parts of the domestic Grand Commander, including front bumper, rear bumper, fog lights, headlights, tail lights, wheel arch accessories, doors, hood, etc. Especially for the 2022 model year models specially supplied by China, the shortage of exterior parts is particularly severe due to the inability of parts from global models to be interchangeable with the Chinese version. The condition of the accessories inside the car is relatively good, but it usually takes 2 months to arrive.

The statements of multiple Jeep dealers confirm the subjective feelings of car owners. The dealer told reporters that since February 2022, there have been problems with the supply of after-sales parts for all domestic car models, with most parts not arriving in a timely manner. Although imported car parts can still be supplied, many parts have a waiting period of up to 2 months. By July 2022, Guangfeike announced the termination of its joint venture operation, further expanding the problem of component supply. Some car components such as water pumps, shock absorbers, bearings, and motors often have to wait for more than 2 months to arrive, and some parts have to wait for more than half a year.

"It means that if this car has an accident, no one knows how much it will cost and how long it will take to fix it, or whether it will eventually be repaired," said the owner of the Northeastern Jeep mentioned above.

Many car owners also complain about the long road to repair their cars. For example, cars in Yantai mainly drive 270 kilometers to Qingdao in order to find officially authorized stores for maintenance and repair. Before applying for bankruptcy, Guangfeike had over 200 dealers nationwide, but now only a few dozen are still operating normally. On average, there are only one or two in a province or municipality, and car owners in provinces and cities such as Shandong and Sichuan can only drive to provincial capital cities for maintenance or repair.

After the bankruptcy of Guangfeike, the residual value of second-hand Jeep domestic models rapidly declined, coupled with a long-term shortage of spare parts, some second-hand car dealers began to reject Jeep models. A car owner from Shandong, who was registered in 2022 and landed at a price of 250000 yuan, consulted six or seven second-hand car dealers before one of them expressed willingness to purchase his car. However, the asking price was only over 70000 yuan, which is about 30% of the original car price.

Dealers in the Gap

Angry Jeep owners often complain to the local business department about their dealers, but the dealers also feel particularly aggrieved. A dealer interviewed told reporters that Zhang Tao, the general manager of a Guangfeike 4S store in Central China, told reporters that the company obtained distribution authorization from Chrysler China in 2014. After Guangfeike was established in 2015, the company further obtained distribution authorization from Guangfeike. Sign an agreement allowing them to distribute imported Jeep, Chrysler, Dodge and other brands, while the latter agreement allows them to distribute domestically produced Jeep brand cars produced by Guangfik. The agreements are signed every three years, with the latest agreement ending on December 31, 2023.

The peak sales of this store were from 2014 to 2015, with an average annual sales of over 1700 vehicles. After the 2016 Freedom Light model oil burning incident, the annual sales of the store began to decline year by year, from 1200 units to around 300 units. From the first half of 2022 to the middle of the year, the manufacturer's product supply is incomplete, and domestic car models do not accept orders and can only be selected from existing inventory. In October, Guangfeike officially declared bankruptcy, and the supply of domestic models was almost completely interrupted, resulting in a sharp decline in the store's sales to over 180 units in 2022.

Zhang Tao told reporters that as early as February 2022, there were problems with the after-sales parts supply of Guangfeike, and most of them were out of stock. "The manufacturer said they were replacing suppliers, and we were also feeling uneasy. Through local distributors and suppliers in Hunan, we learned that the actual situation is likely that Guangfeike did not pay the supplier's payment, and the supplier voluntarily cut off the supply.".

Zhao Hai, an investor in a dealer in East China, told reporters that there was already news spreading in the industry before Guangfeike announced bankruptcy. However, when asked to the regional manager, the response was that everything was normal. Just one month before Guangfeike announced the termination of operations, the regional manager was still issuing a car pickup task to the store.

An interesting detail is that Zheng Hai learned from the media on July 18, 2022 that Guangfeike announced the termination of its joint venture operation, but the email screenshot he provided showed that Guangfeike only officially notified the dealers of this news on July 20, 2022.

"It's particularly dramatic. One company's store manager was still talking to investors in the morning about buying the store, but in the afternoon, Guangfeike announced the termination of operations. Previously, the regional manager and supervisor told us that everything was normal." Zhao Hai said.

Due to the fact that dealers still have inventory vehicles, spare parts, unused rebates, deposits, etc., if Guangfeike repays these debts or losses to dealers in proportion to their net assets after bankruptcy liquidation, the rights that dealers can recover are quite limited. This has precedent in previous bankruptcy cases of companies such as Cheetah Automobile and Dongfeng Renault.

In mid November 2022, 26 car dealerships jointly sought help from the governments of Guangzhou and Changsha. 26 GAC Fiat dealerships have put forward four demands, including the deposit paid by dealers to manufacturers, full cash redemption of deserved rebates, and so on. Since then, the number of dealers participating in rights protection has gradually increased, with approximately 50 as of late November 2022, and the total amount of debt accumulated by dealers is about 230 million.

Chen Yuanxi, a partner of Shanghai Haihua Yongtai Law Firm, previously told reporters that generally speaking, the claims of distributors are more likely to belong to ordinary bankruptcy claims and do not fall within the scope of priority claims stipulated by law. But in the eyes of dealers, GAC Fiat cannot directly "break through" and ignore the losses of dealers. At present, the tug of war between the two sides is still ongoing. As of the time of publication, there are still obstacles in communication between dealers and Stellantis. Some dealers are considering legal proceedings, demanding not only the return of deposits and rebates, but also compensation for business losses caused by improper interruption of operations.

Multiple dealers told reporters that Guangzhou Automobile Group, the Chinese shareholder of Guangzhou Automobile Group, has been actively communicating and disposing of Guangzhou Automobile Group. According to the 50% equity ratio held by Guangzhou Automobile Group, 60% of the dealer's deposit, rebate account, and other cash returns have been paid, and the remaining 40% will be paid in installments. However, communication between the foreign shareholder Stellantis Group and the signing party of the distribution authorization contract, Chrysler China, has been slow and there has been no further action.

It won't be the last one

On December 31, 2022, Chrysler Automotive Sales Co., Ltd. sent an email to the dealer stating that "the Jeep brand import dealer agreement signed between our company and your company will expire on December 31, 2023... Considering Guangfik's bankruptcy application, according to the provisions of Article 14.2 of the dealer agreement, our company may terminate the dealer agreement earlier than the aforementioned expiration date. During the validity period of the dealer agreement, our company will treat all dealers fairly, but due to changes in Chinese automotive certification requirements, we expect to no longer import and supply vehicles that meet Chinese compliance requirements from June 30, 2023.".

In February of this year, Stellantis Group announced an adjustment of its China strategy, with its brand developing in China under a new model, with Jeep's nationwide store count significantly shrinking.

Multiple dealers reported that Guangfeike/Chrysler China originally had over 500 dealers nationwide, but by the time they declared bankruptcy, about 200 were still operating; Although most dealers have signed distribution agreements with Chrysler China that do not expire until December 31, 2023, around October 2022, Chrysler China no longer provides them with new cars. The pick-up system is no longer in use and cannot be accessed. Although the after-sales system can still be used as usual, the supply is often not timely, with a satisfaction rate of only 30% to 40%. It is common for customers to park their vehicles in the workshop for two months and other accessories.

The reporter also learned that some dealers who have re signed contracts with Stellantis Group often have delayed supply of spare parts, among which the shortage of spare parts for domestic cars is the norm.

In addition, in 2020 and 2021, Guangfeike respectively launched activities to offer free maintenance for 3 years and 5 years, as well as 10 free maintenance for 5 years. By the time they declared bankruptcy, many car owners had not yet expired their free maintenance policies. According to the principle of "whoever sells is responsible" in the Automobile Three Guarantees Law, dealers are the main body responsible for fulfilling the above-mentioned customer rights. However, some dealers no longer have a settlement relationship with the manufacturer, and some dealers have withdrawn from the network and closed down. How to continue fulfilling the free maintenance rights of these car owners has also become a challenge.

Multiple dealers have stated that GAC Group's communication attitude and actual actions are relatively positive, compared to Stellantis Group, which seems to be playing football. "We went to Stellantis Group to communicate compensation and customer rights, and the other party asked us to go to Guangfeike," said Zhang Tao.

Due to the inability to repair vehicles in a timely manner, dealers are often complained about by customers to the local market supervision and management department. "The door of the workshop is blocked by customers once or twice a month due to after-sales issues," Zheng Hai said.

In the car owner group, some car owners believe that the shortage of parts is due to Guangfeike being in the process of bankruptcy liquidation, resulting in the sealing of inventory spare parts. However, last week, the reporter visited Guangfeike's after-sales parts center warehouse in Changsha and found that the shelves in the venue were all empty. Looking inside through the open warehouse door, no spare parts were visible within sight.

It should be noted that as of the time of publication, Stellantis Group has not responded to the relevant questions from First Financial reporters regarding the issue of delayed supply of accessories and claims from distributors.

Lawyer Han Xiao from Beijing Kangda Law Firm told reporters that car owners can call the 12315 complaint hotline in accordance with Article 39 of the Consumer Rights Protection Law of the People's Republic of China to consult, report, complain or request mediation from the local market supervision department, or file a lawsuit with the people's court. As a shareholder of Guangfeike, Stellantis Group has the responsibility and obligation to safeguard the interests of its automotive brand and customer group. As consumers, car owners can directly make relevant demands to Stellantis Group and urge them to help solve difficulties. Meanwhile, as Guangfeike has already applied for bankruptcy, according to Article 48 of the Enterprise Bankruptcy Law of the People's Republic of China, creditors should declare their claims to the administrator within the deadline determined by the people's court. Therefore, if the distributor wishes to demand Guangfeike to assume responsibility or claim rights from Guangfeike, they should first achieve this through debt declaration and file a debt declaration with the manager. If the debtor or creditor has objections to the claims recorded in the debt statement, they should explain the reasons and legal basis. If, after being explained or adjusted by the manager, the objector is still dissatisfied, or if the manager refuses to explain or adjust, the objector shall file a lawsuit for debt confirmation with the people's court within fifteen days after the verification of the creditor's meeting is completed.

On September 5th and September 6th, reporters arrived at the entrance of Guangfeike Company twice. The huge workshop was quiet and silent, and the slogan "WCM world-class manufacturing" stood at the entrance. However, the factory had been idle for a year. Security personnel told reporters that the equipment in the workshop has been sealed off, and only the liquidation team is working in the company building, with only security and cleaning personnel remaining.

Guangfeike was once a star car company in Hunan Province. Covering an area of 750000 square meters, Guangfeike has an annual production capacity of 250000 cars. In 2017, its sales reached 222300 vehicles, making it one of the four enterprises in Changsha Economic Development Zone with an output value exceeding 10 billion yuan that year. But just a few years later, Guangfeike went bankrupt and went into liquidation. According to the bankruptcy application documents of GAC Fiat, as of September 30, 2022, its total assets were 7.322 billion yuan and total liabilities were 8.113 billion yuan, with an asset liability ratio of 110.8%.

In the shuffle of the Chinese car market, Guangfeike is not the first, nor will it be the last. What is more noteworthy than a company going bankrupt is how to protect the rights and interests of millions of car owners.