Chery's business revenue still in the red in Q1

Gasgoo.com (Shanghai May 13) - According to it's recently released performance review for the first quarter, domestic automobile manufacturer Chery has yet to fully recover financially. In the review, which was cited by a report appearing in China Business News today, the manufacturer's total business revenue for the quarter totaled negative 191 million yuan ($30.83m). Increasing liability costs and a virtual halt in revenue growth have been cited as major reasons behind its poor quarterly results, which were announced as Chery continues to implement its new business strategy to unify its various internal organizations in order to decrease costs and improve performance.

In the review, Chery reported that it earned a net profit of 129 million yuan ($20.92m) in the first quarter of this year. By comparison, the manufacturer reported a net deficit of 88.97 million yuan ($14.15m) over the first quarter of 2012. The negative 191 million yuan deficit the manufacturer suffered in its total business revenue this past quarter is also better than the negative 234 million yuan ($37.21m) reported in the first quarter of last year. Furthermore, the manufacturer's non-business revenue over tripled from the first quarter of last year to the first quarter of this year.

An internal source from Chery, who wishes to remain anonymous, shed some light on the status of the manufacturer's business operations. "Profits have recovered [this quarter], but this was due to non-business revenue, while business revenues did not grow at all," the source explains. At the same time the manufacturer's debt grew 3.67 billion yuan ($592.37m). Its total debt is now at 50.25 billion yuan ($8.11b), while its debt ratio increased from 73.58 percent last year to 74.22 percent this year.

According to statistics from the China Association of Automobile Manufacturers, Chery sold a total of 133,000 vehicles in the first quarter of the year, nearly on par with the 132,000 vehicles it sold in the first quarter of 2012.

In a bid to increase sales and market share, Chery announced that it is preparing to unify its domestic and international sales networks, as well as halt its current multi-brand strategy, ending individual sales of its Rely and Riich brands. Chery plans to reduce its total product line up from the over 20 it currently offers to around 11 or 12 in the future. However, various reports also reveal that this strategy requires Chery to reduce its workforce significantly, with some of them putting the number of employees to be let go as high as 9,000. Although Chery has yet to officially comment on the matter, sources from the manufacturer's managerial, R&D and production teams have all confirmed the news.