Chinese Gionee Smartphone Maker Slips into Bankruptcy
Chinese smartphone maker Gionee is in bankruptcy due to heavy debts partly blamed by Liu Lirong, the head of the company, who spent the company’s funds in Chinese casinos.
The Chinese mobile device manufacturer Gionee slowly slips into bankruptcy due to massive debts to financial institutions, suppliers, and advertising and marketing agencies.
According to the Securities Times, lately, Gionee would not be paying its suppliers and would be looking for an agreement to continue the partnership. The accusation comes from the suppliers themselves (20 to be exact), who filed an application for bankruptcy reorganization against the Chinese company at the Shenzhen Intermediate People’s on 20 November.
The company’s leader to blame?
The company’s total debts now amount to about $2.45 billion, which is to some extent contributed by Liu Lirong’s leader, otherwise, a passionate gambler who spent the company’s funds in Chinese casinos.
Partners working with the company had completely lost confidence in the company when they learned that Liu Lirong consumes up to $30 million each month from the company’s own resources for private expenses. While Liu Lirong alone claimed in his defense that his assets were the only company revenue, so it is expected that “some of its public activities” will be funded from the company’s budget.
Last week, the Chinese website Jiemian reported that the man would lose over ten billion yuan ($ 1.4 billion) while playing in a casino in Saipan. In his defense, the president then denied that he had lost “only” about one billion yuan (or 144 million dollars).
“I did participate in gambling in Saipan, but how could I possibly lose that much (10 billion yuan)? If it is true, shares of Imperial Pacific [the casino owner] should have surged,” Lirong, Gionee’s chairman and chief executive, said in an interview with Securities Times.
The problem is that the money used to gamble was not his, but would have been borrowed from his company. This is a relatively high loss of funds for the Chinese brand, especially at this time when it is in a growth phase, especially in the Indian market.
Gionee is one of the largest mobile companies in China although the increasing sales increase of its competitors is pushing the company to have less income and even more expenses. The company was position in sixth place in smartphone sales in China last year behind Apple. In the second quarter of this year, Gionee was forced to release half its employees as it was unable to pay them their salary.
In spite of everything, the CEO denies that Gionee’s problems come from his bets, although he recognizes that he may have been wrong to use certain accounts for personal use. We will have to wait to see if the Chinese authorities enter into this matter and if the company is able to recover from this setback.