Caterpillar writes down value of China unit
An internal investigation at the Caterpillar machinery company has revealed "deliberate, multi-year, coordinated accounting misconduct" at a Chinese subsidiary.
Caterpillar bought the parent company of Siwei, which makes mining equipment, for more than $650 million in June 2012 as part of its strategy to expand in China.
Due to the accounting problems, the Peoria, Ill.-based manufacturer has written off $580 million of that purchase as a "goodwill impairment charge," according to a filing with the U.S. Securities and Exchange Commission.
The company said it noticed a discrepancy between Siwei's accounting records and its inventories, which led to an investigation that uncovered "inappropriate accounting practices" that "overstated profit," the filing said.
Caterpillar said it has fired and replaced senior managers at Siwei responsible for the problems and is investigating whether the subsidiary's board of directors knew about the misconduct.
"The actions carried out by these individuals are offensive and completely unacceptable. This conduct does not represent in any way, shape or form the way Caterpillar does business or how we expect our employees to work," said Doug Oberhelman, Caterpillar's CEO, in a statement.
-- Mateusz Perkowski