Unbearable loss of double money shares with Michelin

The rumors of the break-up of the French tire giant Michelin and the double-money shares have finally made progress!

Shuangqin shares announced today that as the joint venture between the two companies - Shanghai Michelin Warrior Tyre Co., Ltd. (hereinafter referred to as the joint venture company) has suffered huge losses over the years, the company intends to transfer 28.49% of the company holdings of shares (Michelin company holdings 70%), the board of directors The relevant proposal has been passed on the above transfer.

According to the announcement, the joint venture company was established on March 22, 2001 and is an unlisted Sino-foreign joint venture company established in Shanghai. The original share capital was 663 million yuan and the nominal value of each share was 1 yuan. In 2005, the capital increase of the joint venture company was approved by the state and the share capital was changed to 963 million yuan. At present, Shuangqian’s shareholding ratio is 28.49%. The business scope of the joint venture company involves manufacturing, processing and sales of high-grade radial tires, tire-related steel wires, and other tire-related products, and provides related services. As of March 31 this year, the net assets of the joint venture company was -734 million yuan. After the asset evaluation, the owner's equity was initially recognized as 416 million yuan. Shuangqian shares will be listed on the Shanghai United Assets and Equity Exchange at a higher price than the evaluated investment interests.

In response to the reasons for the transfer of equity, the company explained that it took into consideration the consecutive huge losses of the joint venture company over the years, and at the same time, combined with the adjustment of the company’s own product structure and the need to improve profitability, it decided to transfer the equity held by the company.

Analysts said that the rumor of the split between Michelin and Shuangqin shares had been circulated in the industry as early as last year. Apart from the reasons for the joint venture’s losses year after year, it was also related to the gradually blurred product positioning.

According to the original agreement, Shanghai Tire & Rubber Co., Ltd. (the predecessor of Shuangqin Co., Ltd.) provided the joint venture with the right to use the trademark of the national tire brand, the Huili brand, with a history of 60 years. In China, Michelin, a multi-brand company, has three brands: Michelin, Bailuchi and Huali. According to the segmentation of the market, the Michelin brand focuses on the high-end market; the Pull back brand is focused on cost-effective, mainly in the low-end market; and Bailuchi mainly faces the SUV and other personalized markets. Later, the sharp price cuts of Michelin tires, along with the price increase of the Pull Back brand, resulted in a smaller and smaller price difference between the two. The Michelin brand's eagerness to enter the low-end market was seen as a sign of the split between Michelin and Double Money shares.

Earlier there was media coverage that if the company withdrew from the joint venture company, according to the previous agreement, Shuangqian shares would not be able to use the return brand. Therefore, Shuangqin shares will start from scratch and concentrate on building its own brand of car tires. At present, the first phase of Chongqing Base, which is being built by Shuangqin Co., Ltd., will form an annual production capacity of 1 million all-steel radial tires, and will gradually form an annual output of 4 million all-steel radial tires and 15 million semi-steel radial tires. 20 million motorcycle tire production scale. Among them, 15 million semi-steel radial tires are passenger car tires. After they broke up with Michelin, Shuangqian shares may concentrate on building their own brands.

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