FAW-Volkswagen Car chairman resigns amid corruption scandals; 10 billion yuan (US$1.6 billion) had evaporated from the group’s real estate business

April 17, 2013 Leave a comment

FAW Car chairman resigns amid corruption scandals

Staff Reporter, 2013-04-17

First Automobile Works Group chairman Xu Jianyi has resigned as chairman and as member of the board at the group’s subsidiary FAW Car. The development has fueled speculation that his exit is a result of the series of corruption scandals within the state-owned enterprise.

FAW Car released a statement on Friday saying Xu’s resignation was due to work demands and he will not be taking up any other posts at the subsidiary. Xu will however remain as chairman of the group.

The statement came a day after reports that 10 billion yuan (US$1.6 billion) had evaporated from the group’s real estate business and that 200 senior managers had been whisked away by investigators for questioning.China’s National Audit Office released a report of audit results last June that focused on 15 state-owned conglomerates, and which revealed irregularities in the financial accounts of the automaker’s subsidiaries.

According to the office, FAW Tianjin failed to report 4.1 million yuan (US$663,000) in salaries paid to top executives from 2008 to 2010. Another subsidiary, FAW Jiefang Automotive, was found to have used false receipts during the same time period.

The report also pointed out that FAW-Volkswagen failed to file accurate accounts related to 176 cars used for trial runs between 2007 and 2010. Media reports said a store in Changchun, where the group is headquartered, had secretly traded over 900 such cars for illicit profits.

Jing Guosong, former deputy general manager of FAW-Volkswagen Sales, had allegedly colluded with car dealers to secure illegal benefits from such trades worth millions of dollars. Corruption scandals, involving over 10 billion yuan (US$1.6 billion), were reportedly also found in the component purchase unit of the group.

The spate of scandals was said to have put Xu under enormous pressure. Sources said 10 senior executives including Xu, and those from the group’s subsidiaries, were being investigated by the audit and disciplinary inspection authorities.

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