GUANGZHOU -- A failed foray into electric cars and the demotion of the woman who led the charge have cast a pall of uncertainty over China's biggest air conditioner manufacturer.
Amid slumping sales of its core products, Gree Electric Appliances sought to diversify by acquiring a Chinese electric vehicle company but was recently forced to drop the plan. Amid the debacle, Chairperson Dong Mingzhu, considered one of China's most prominent businesswomen, was dismissed from the top post at parent Gree Group.
In hindsight, the first sign of trouble came back on Feb. 22, when Gree Electric halted trading of its shares on the Shenzhen Stock Exchange. The company explained that the stoppage was due to a major acquisition, but the suspensiostrn ended up lasting abnormally long -- more than half a year. Trading finally resumed on Sept. 2.
The delay was due to prolonged negotiations to acquire Zhuhai Yinlong New Energy, a midsize manufacturer of electric cars in Gree's home province of Guangdong. Gree Electric intended to spend some 13 billion yuan ($1.88 billion) on the deal. The company finally announced the plan in August, but the saga did not end there. Dong's suggestion to fund the acquisition with a private placement sparked a confrontation with shareholders -- a battle she wound up losing.
On Oct. 18, the State-owned Assets Supervision and Administration Commission of the State Council, which owns 100% of Gree Group, notified the company that it was relieving Dong of her duties as group chairperson. While she remains head of Gree Electric, the move was widely seen as a step to weaken her influence in a company she catapulted into the top ranks of the global air conditioner business.
The SASAC said Dong's dismissal was not related to the Zhuhai Yinlong New Energy acquisition. In any case, on Nov. 17 -- just six days after the dismissal became public knowledge -- Gree Electric announced it was abandoning the purchase.
More drama was still to come. Over the 11 days from Nov. 17, Gree Electric shares surged 27% for no apparent reason. This prompted the Shenzhen Stock Exchange to instruct the company to investigate; the shares were again suspended on Tuesday.
On Monday, the SASAC announced it had chosen Zhou Lewei, 46, to succeed the 62-year-old Dong atop Gree Group. Zhou is a former vice ward chief under the municipal government of Zhuhai.
Time to regroup
Investors and company insiders alike wonder whether Gree Electric still plans to buy an electric car business at all. A bigger question, perhaps, is how the company will fare under a weakened Dong. It still needs to resuscitate the slumping air conditioner operations, identify new growth areas and invest accordingly.
Gree Electric rose in tandem with China's emergence as an economic powerhouse, and Dong was instrumental in its success. She joined the company in 1990, at age 36, and proved herself to be exceptionally adept at selling air conditioners. She reached the top of the ranks in 2012.
Since then, the outspoken Dong has further raised the company's profile by appearing on television programs and commercials. A rivalry between Dong and Lei Jun, the 46-year-old founder of Chinese smartphone maker Xiaomi, has received plenty of coverage.
But Dong's charisma could only carry her company so far. Gree Electric's business has slumped amid China's economic slowdown. Revenue for the year ended December 2015 plunged 29% to about 97.7 billion yuan.
Adding to the pressure on Dong, Gree's biggest rival in the air conditioner business is on the march. The company, China's Midea Group, in August completed a roughly $5 billion acquisition of German industrial robot manufacturer Kuka.