Vietnamese carmaker VinFast is set to sell its manufacturing business and two main factories to offload USD $7 billion (AUD $9.7 billion) worth of debt.
The big deal
Last week, VinFast revealed that it would sell its Vietnam-based manufacturing business along with two main factories to a group of investors. The deal is valued at VND 13.3 trillion or AUD $704 million, excluding the assumption of VinFast’s USD $7 billion debt. Once this multi-party deal is finalised, VinFast will be cleared of its remaining debt.
Aside from its large debt, VinFast has also yet to make a profit in its nine years of operation. Last year, the company posted a USD $3.9 billion (AUD $5.4 billion) loss, with manufacturing costs as its biggest expenditure.
According to VinFast’s regulatory filing, the deal will allow the company to shift to an “asset-light” business model. Once the carmakers changes business models, it will operate under two separate entities; VinFast Vietnam JSC (VFVN) and VinFast Production and Trading JSC (VFTP).
VFVN will assume all strategic and “soft assets,” focusing on research and development, intellectual property, sales, and after-sales. VFVN will also assume control of the company’s subsidiaries in Vietnam, Germany, and Australia.
On the other hand, VFTP will no longer be owned by VinFast but will continue to manufacture vehicles. Furthermore, VFTP will continue to cooperate with VFVN according to manufacturing and supply agreements.
Money talks
Financial analysts confirm that the sale could be beneficial for the company, but its restructuring brings VinFast’s governance into question.
“From a strategic and financial perspective, this move makes sense and provides a solid foundation for VinFast to grow,” said auto industry analyst Mehdi Jaouadi. “However, from a governance perspective, this strategic decision has some red flags and raises some question marks.”
VinFast has explained that the restructuring will not affect its operations abroad, including its factories in Indonesia and India.
Founder and chairman of VinFast’s mother company, VinGroup, Phan Nhat Vuong, is reported to be part of the deal’s buying group. His son, Pham Nhat Quan Anh, was announced as VinFast’s chairman last 23 May.
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