Chinese Sucker Caterpillar!! Played Like A Fiddle!

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Well, some have to learn the hard way. 

Caterpillar writes off most of China deal after fraud

Reuters) – Caterpillar Inc uncovered “deliberate, multi-year, coordinated accounting misconduct” at a subsidiary of a Chinese company it acquired last summer, ……Shares of Caterpillar fell 1.5 percent in afterhours trading following news of the fraud, …..

Caterpillar, the world’s largest maker of tractors and excavators, said on Friday it would take a noncash goodwill impairment charge of $580 million, or 87 cents per share, in the quarter.

Analysts had expected the company to report $1.70 per share when it reports its results on January 28, according to Thomson Reuters I/B/E/S. ….

A member of the Caterpillar board during the course of the Siwei deal told Reuters the board was distracted at the time by a larger transaction and paid relatively little attention to the Siwei acquisition.

While Siwei was not U.S.-listed, the broader accounting question has been a thorny one for U.S. companies looking to grow their business in China.

Well, maybe it was stupidity on Caterpillar’s part, maybe there was some underhanded dealings.  Chinese companies are notorious for poor accounting practices.  There’s lots of reasons for this.  Companies should take extra care when purchasing Chinese companies. 

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26 Responses to Chinese Sucker Caterpillar!! Played Like A Fiddle!

  1. Keitho says:

    “A member of the Caterpillar board during the course of the Siwei deal told Reuters the board was distracted at the time by a larger transaction and paid relatively little attention to the Siwei acquisition.”

    That is unacceptable to any shareholder. Admission of incompetence is usually grounds for dismissal at best.

    • suyts says:

      Yeh, I’m thinking not all of them were that stupid. Someone got their wheels greased. Distracted by a larger transaction? This small transaction wiped out half of this year’s profits!!!

  2. DirkH says:

    It’s only a scratch.
    Still owning CAT; went up 2% on FR and allegedly 1.5% down after hours when the news broke.
    So I hope I still get out with a nice profit of, at the moment, 10% in Euros (since OCT)… Not a lot… but not that bad for a US company under the Obama regime.

  3. kelly liddle says:

    I have to point this one out, the biggest by far value ever accounted for incorrectly was US subprime mortgages. This was conducted by “every” large financial institution including government institutions and the Fed. If you claim government had no idea that could be true but makes your government look no better than any developing country.

    So the message is buyer beware regardless of the country.

    • suyts says:

      Always, buyer beware, but Caterpillar should have known better. A capitol inventory should have been required before the purchase.

    • DirkH says:

      Oh, our China apologist.

      Here’s an interesting thing.

      http://www.zerohedge.com/news/after-creating-dollar-exclusion-zones-asia-and-south-america-china-set-corner-africa-next

      China is building up more and more trade relationships in Yuan, Gold or barter agreements.
      Yuan is as good as USD as the Yuan is pegged to the Dollar and appreciates much slower than it would naturally do, and is on a short term basis practically not fluctuating against the Dollar.

      Now, if they feel the time is right they will simply flick a switch and let the Yuan float freely.

      At that moment the USD will go into freefall. It is in fact not so that the Chinese are weakening the Yuan but more like the Yuan is keeping the USD up…

      • suyts says:

        As soon as the US isn’t the largest consumer base. Once that happens, then tears will fall.

        • DirkH says:

          Yes. At the moment they still need to dump products to the US.

          And it occurs to me that the Chicoms ALREADY control the value of the Dollar. Their approach is to adjust the Yuan; they will CONTROL the fall of the Dollar (and the rise of the Yuan) gradually.

          The Yuan BTW is now exactly where it was 5 years ago when expressed in AUD or NZD.

        • kelly liddle says:

          Dirk
          Ok I will go with what you say even though I might put it another way. I would say something like China is actually in fact the real reserve currency but due to restrictions it is difficult to get your hands on. I really hate how in Australia at the moment everyone is saying our currency is strong. By my reckoning it might be a little strong maybe up to 5% but to call it strong is ridiculous. The fact that countries that can’t pay their debts (in current value) have currencies going down relative to ours should be expected and those currencies should be weak as a free market would value them. Should we join them?, no way in the world. I will keep my currency and hope that future decisions keep it stable. That actually is the main purpose of a reserve bank and the other things like employment in my opinion are bullsh*t.

          As far as dumping products China does have to compete with other countries and would mean the other countries are too, but individual examples in any country might be correct. I will be the relativist and say why is US and EU dumping agricultural products? In this case personal because Australia does not have subsidies that can compete with yours. Are these subsidies helping your countries I doubt it.

      • kelly liddle says:

        Dirk
        I am not appologising for anything just saying everywhere to differing degrees is the same. When I invest I assume around 3% of company managers are robbing me blind (in any market). If I was not to assume this I might end up angry some time. Most Americans have indirect investments in China anyway. If they don’t then they are probably buying domestically focused companies which would mean if it is large caps, investment and not pure speculation they are losing out. I would also be surprised if you believe nothing was done wrong by anybody in the subprime thing and it just happened. How many people have been punished or at least fired, it appears a total number of 0 which does not bode well especially the public servants whose job it was to make sure this does not happen.

        • DirkH says:

          Well, your natural tendency to be a relativist about everything made you draw the analogy to corruption in America.

          If I told you Stalin killed millions of Ukrainians you would probably instantly bring up some genocide committed somewhere in the West.

          Of course you can do that. But one wonders about the motive.

        • kelly liddle says:

          Suyts seemed to be implying to a certain extent that something is different in China. I pointed out that it is simular. There is a bit of a motive and that is that the US is moving in the wrong direction and China is actually moving in the right direction. If you extend this out for 30 years the roles will have reversed. The trajectory is important and the trajectory in the west is not good. ASEAN will be a free trade area possibly simular to EU but without what has turned out to be a stupid currency union. This is those countries that compete with China in many ways but no one says anything. Watch out world.

          From what I can see now in many developing nations advancement and capitalism is unstoppable but the reverse to a point is true in many western countries. This also applies to freedoms in general.

        • kelly liddle says:

          ASEAN will have free trade in 2015.

        • suyts says:

          But, will it be “fair trade”, as well?

        • suyts says:

          Kelly, in China, the companies lie. They’re forced to.

          Is there corruption in the hearts of every man, every where? Yes, of course there is. But, it isn’t done by government imperative as it is in China. That’s the difference.

        • DirkH says:

          kelly liddle says:
          January 20, 2013 at 10:47 am
          “Suyts seemed to be implying to a certain extent that something is different in China.”

          Yes, there is something fundamentally different in China.
          Even though the application of the rule of law has become more arbitrary under Obama than it ever was (probably since FDR who, like Obama, rode roughshot over congress and reached the climax of his wet dreams by imposing the war command economy), China has no rule of law at all. And there is no tendency of improvement.

          I think as long as you don’t have any opinion of your own and do as your told you’ll be fine in China, though. As long as you pay the local party commissar a favor every now and then.

        • kelly liddle says:

          “in China, the companies lie. They’re forced to.”

          Suyts If you believe the above example is this then let me know in the future what punishments the people get and compare to Enron.

          “But, will it be “fair trade”, as well?”

          If you can remember what I have said before the AUSFTA is not fair based on only being equal. As far as that concept this agreement is likely to be more fair but to quote my late mother “life is not fair, it is not supposed to be fair” Never a truer statement could be said.

          “And there is no tendency of improvement.”

          Dirk I will dissagree very much. They are very capitalist now in only 30 years and we can even see protest that could not happen even 10 years ago. In the end if they don’t improve then they will suffer the same fate as Emperors.

        • suyts says:

          Kelly, you’re missing the point I was trying to make. Yes, there are corrupt people everywhere. But, what happens in China is institutionally based and systemic. China’s economic numbers have long been known not to be trustworthy. While many other nations’ are questionable, China’s is more so. This derives from state mandates and quotas.

          Is free trade a desirable quest if it is known that it won’t be fair trade?

        • kelly liddle says:

          “Is free trade a desirable quest if it is known that it won’t be fair trade?”

          Yes definately. Australia’s free trade agreements with Thailand and US are very worthwhile, they make Australian’s richer. I do not care if you possibly gain a little more or I would argue not because is only delaying certain sectors from being competitive or dissapearing but that is up to the US or Thailand (just like our subsidies to the car industry which are probably more than US and Thailand). We win that is all I care, it is irrelevant if you lose or win in this context.

        • suyts says:

          Excellent answer! As long as everyone gains in the agreement.

        • DirkH says:

          kelly liddle says:
          January 20, 2013 at 12:03 pm
          “Dirk I will dissagree very much. They are very capitalist now in only 30 years and we can even see protest that could not happen even 10 years ago. ”

          Maybe they’re running out of nondescript buildings in commercial zones that they can cram full of political prisoners to let them rot and beat them with iron rods from time to time while spraying them with boiling water.

        • kelly liddle says:

          Dirk
          I did not say China is now the free-est country on the planet only that they are moving in the right direction and of course re-education camps are not good.

        • kelly liddle says:

          “As long as everyone gains”

          If you mean on average then yes but if you literally mean everyone then of course not.

        • DirkH says:

          kelly liddle says:
          January 20, 2013 at 1:09 pm
          “Dirk
          I did not say China is now the free-est country on the planet only that they are moving in the right direction and of course re-education camps are not good.”

          China had thousands of years experience of being a feudalist empire with no social mobility or freedom at all. At the same time they were the largest manufacturer on the planet. Chinese goods were desired in the West while china only had interest in Gold and Silver; as a consequence precious metals in the British Empire got so depleted they started the Opium trade to claw it back.

          200 years of manufacturing history:

          Assuming that the Chicoms have the choice between allowing a free society or perish is a superstitious belief. They might choose to stay the most suppressive regime yet continue to dominate manufacturing.

  4. kelly liddle says:

    Dirk
    I will get back to you. In both your recent comments I have something to say but have to think a little and also I am a bit lazy after a few beers.

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