Troubled Chinese Giant LeEco Said to Delay Paying U.S. EmployeesBy
Tech conglomerate’s U.S. plans falter after aggressive growth
Some high-profile executives, wooed from Samsung, have left
Chinese technology conglomerate LeEco Inc. delayed payroll for U.S. employees this month, people familiar with the matter said, another sign that billionaire Jia Yueting’s media and Internet empire is grappling with a cash squeeze.
LeEco’s U.S. employees are normally paid on the 15th and last day of every month, but the company has told employees that March 31 paychecks would be delayed until April 4, the people said, asking not to be identified discussing private matters. LeEco told employees in the U.S. the delay was due to issues with moving money from China, according to one of the people.
After rapid expansion of his tech empire, Jia admitted late last year that the company was struggling to raise cash. Some suppliers said that LeEco was behind on payments and the company was stripped of some sports broadcasting rights after defaulting.
The paycheck delays are stoking frustration at a U.S. operation that’s suffered key executive departures in the last few months. Jia said in October that LeEco employs more than 500 people in the country “with more being added each week,” but the company hasn’t disclosed its latest U.S. headcount.
A LeEco spokeswoman said payroll was met April 4.
LeEco, the holding group for businesses controlled by Jia that span cars and media to smartphones and TVs, declared its cash crunch almost over in January after securing 16.8 billion yuan ($2.2 billion), mainly from Chinese tycoon Sun Hongbin’s Sunac China Holdings Ltd. That ended a months-long search for capital and inspired Jia to declare open-season on Tencent Holdings Ltd. and Alibaba Group Holding Ltd., which dominate the Chinese internet and media industry.
One of LeEco’s main subsidiaries is Leshi Internet Information & Technology Corp., a Netflix-like streaming service and electronics manufacturer. Jia has borrowed against his shares in Leshi for cash that he invested into his other companies, regulatory filings show.
Jia has aggressively chased funding and attempted to establish a foothold in the U.S. But those efforts may be faltering. A proposed $2 billion acquisition of California TV maker Vizio Inc. is being held up by tighter controls on Chinese currency outflows, according to a person familiar with the matter, and as reported in Chinese media. That deal was intended to create a beachhead for branding and acquiring American customers. LeEco is now exploring other options, including taking a minority stake in or partnering with Vizio, the person said
A spokeswoman for Vizio declined to comment.
Jia lured executives from global technology giants to run LeEco’s U.S. operations, establishing an 80,000 square foot North American headquarters in San Jose, California. He hired Todd Pendleton, a high-profile former marketing executive, and Shawn Williams, a senior vice president, from Samsung Electronics Co. Both men left after only about a year at LeEco, according to several people familiar with the matter and Williams’ LinkedIn profile. The company also snagged a former Qualcomm Inc. executive to run research and development. Over the past few months, LeEco also let go of a number of U.S. employees, according to people familiar with the matter. Also, year-end bonuses were not paid to many LeEco U.S. employees, one of the people said.
Frustration among the U.S. contingent has grown as employees often report to bosses in China who appear to have little understanding of the American market, according to current and former employees. Jia makes most of the decisions instead of allowing U.S. executives autonomy in their own home market, they said.
Jia has also been trying to get an electric-car making venture he backs -- Faraday Future -- off the ground. In January, the startup staked its claim to the world’s fastest electric car with the 1,050-horsepower FF91, showing footage of it outracing Tesla Inc.’s Model S during a glitzy event in Las Vegas.
But that business has also faced executive departures and a cash shortage. It’s battled allegations of missed payments. Work on its signature plant in northern Las Vegas has been halted, though the company said in an emailed statement that construction should resume “very soon.”
Most of Faraday’s U.S. finance team left or were let go in the past year, according to people familiar with the matter. The company has recently hired a handful of new employees, two of the people said. When U.S. executives brought up financial challenges at the company late last year, Jia encouraged them to continue spending, several people said. In March, Faraday hired former Deutsche Bank AG executive Stefan Krause. He’ll be tasked with trying to raise funds from U.S. investors and hire more staff for the U.S. finance team, according to two of the people. Faraday scrapped plans for a California auto plant to focus on building its main factory in northern Las Vegas.
“Under Stefan’s financial leadership, we are currently working on rounds of financing,” to bring the FF91 to market, Rich Otto, a spokesman for Faraday, said. “Regarding hiring, we have been and will continue our efforts to bring top talents to Faraday Future, as we see a strong asset in our employees. This sentiment applies to all functions across FF, and we are actively hiring on all business units.”
Despite LeEco’s struggles, the outspoken Jia continues to make bold claims about the future of his company. Jia, who got his start working in IT at a local tax bureau in China’s Shanxi province, has taken aim at Apple Inc. and Tesla, saying his firms will one day overtake them. In January, he said he would use Sunac’s investment to “surpass” Baidu Inc., Alibaba and Tencent. Jia told investors in January that he expected Leshi’s market value to reach $100 billion, remarks that drew a rebuke from Shenzhen’s stock exchange and for which Jia later apologized.
— With assistance by David Ramli