Jan. 19 (Bloomberg) -- Caterpillar Inc., the world’s largest maker of construction and mining equipment, said it will take a $580 million writedown after discovering accounting “misconduct” at a Chinese unit acquired last year.
The non-cash goodwill impairment charge will reduce fourth-quarter earnings by about 87 cents a share, Peoria, Illinois-based Caterpillar said yesterday in a statement. Senior managers at Zhengzhou Siwei Mechanical & Electrical Manufacturing Co. who were found to be responsible for the “deliberate, multi-year, coordinated accounting misconduct” were removed and a new leadership team put in place, the company said.
Caterpillar acquired ERA Mining Machinery Ltd., Siwei’s parent company, for HK$6.15 billion ($793 million) to gain factories that make underground coal-mining equipment in China, the world’s largest coal producer. The irregularities found at Siwei are the latest setback for Caterpillar in China, after it said in April that it was moving unsold excavators to other countries amid excess inventory.
“The actions carried out by these individuals are offensive and completely unacceptable,” Caterpillar Chairman and Chief Executive Officer Doug Oberhelman said in the statement. “We moved quickly and decisively to hold the responsible leaders directly accountable for the wrongdoing.”
The discrepancy found by Caterpillar was between physical inventory and accounting records, the company said.
Caterpillar fell 1.5 percent to $96.12 at 6:27 p.m. yesterday in New York after the close of regular trading.
Oberhelman said in September he was positioning Caterpillar to become the “leader” in China by 2015. The company, which doesn’t normally detail sales in China, said the country represented 3 percent of revenue in the first quarter last year.
“We continue to believe that the Siwei acquisition is well aligned with our strategy,” Steve Wunning, Caterpillar group president with responsibility for resource industries, said in yesterday’s statement.
To contact the reporter on this story: Jack Kaskey in Houston at email@example.com
To contact the editor responsible for this story: Simon Casey at firstname.lastname@example.org