Recently, a Weibo user (@Engineering Machinery Big Shot) revealed that in the construction machinery industry's popular layoff season, Sany Heavy Industry is asking employees to fill out 'Unpaid Leave Application Forms' themselves to circumvent legal risks and economic responsibilities they should bear.
Zoomlion and Sany 'Multiple Ways' Disguised Layoffs
Amid the overall industry downturn, 'layoffs' have become a primary way for companies to save operating costs. On July 8, informed sources told the Beijing Business Today that several domestic industry giants, including Zoomlion and Sany Heavy Industry, have begun 'various ways' of disguised layoffs, highlighting the helplessness during the industry downturn.
The source said that Zoomlion, under the pretext of 'process reengineering and job bidding,' is forcing employees to resign voluntarily. 'The company will arrange two or three undesirable positions for an employee to choose from; if they disagree, they directly negotiate to terminate the labor contract. Those who lose their jobs this way cannot get labor compensation. Because Zoomlion has a team of lawyers, they cannot let employees win; if one wins, many will demand compensation, and the amount would be staggering.'
Sany Heavy Industry, also in the same city, is accused of similar disguised layoffs. 'The company asks employees to fill out 'Unpaid Leave Application Forms' themselves to circumvent legal risks and economic responsibilities.' The source revealed that besides these companies, XCMG, Hyundai, and Doosan also engage in disguised layoffs, and with 'unlimited creativity.'
In response to the exposed situation, the Beijing Business Today contacted Sany Heavy Industry and Zoomlion for confirmation. Sany's media representative said they were unaware of the situation, while Zoomlion had not responded as of press time.
In fact, disguised layoffs by Sany and Zoomlion are not isolated cases. Not long ago, Rongsheng Heavy Industries, a leading domestic private shipbuilder, was exposed in a labor dispute. Although the company stated it is 'undergoing transformation and upgrading, and needs to optimize the existing personnel structure,' employees revealed that the so-called optimization actually involves 'job transfers, salary cuts, rotating shifts, labor discipline checks, and delayed wages' to make employees resign voluntarily and avoid paying large compensations.
A senior analyst in the machinery manufacturing industry analyzed that in the past 2-3 years, the machinery industry had a shortage of talent, and it was very easy to enter the industry. However, since last year, the market has been declining, and companies, with tightened funds and banks no longer lending, are cutting costs through layoffs, which reflects the helplessness of the entire industry. Data shows that Sany Heavy Industry and Zoomlion, the two machinery giants, both saw significant declines in net profit in the first quarter of this year, dropping 43.9% and 71.67% respectively.
Sany Heavy Industry's Layoff Clarification Remains Unclear, Insider Trading Suspicions Abound
Although Sany Heavy Industry executives have repeatedly clarified and explained the 'layoff gate' incident, a series of evidence and facts still make their defense seem far-fetched and cover-up. On April 26, 2013, Sany Heavy Industry's 2012 annual report directly confirmed the authenticity of the layoff rumors that had been continuously关注. According to the annual report, by the end of 2012, Sany Heavy Industry's total number of employees had sharply decreased from 51,827 at the end of the previous year to 34,887, a net reduction of 16,940 employees, a decrease of 32.69%. From a China News Service report on July 7, 2012, it was learned that in the first half of the year, Sany Heavy Industry had also recruited more than 3,000 new employees, which means conservatively, the cumulative layoffs in 2012 reached 20,000.
According to Xiang Wenbo's own statement of 'saving 100,000 per person,' Sany Heavy Industry actually saved 1.7 billion yuan in costs through layoffs in 2012, while its full-year net profit in 2012 was only 5.686 billion yuan, accounting for 30%. Most importantly, this portion of profit increased by reducing costs through layoffs was not created by the company's products and services. This profit cannot objectively reflect the company's profitability and will undoubtedly mislead investors to some extent.
Regarding the layoffs, Sany Heavy Industry Group executives firmly denied rumors, stating that a 30% layoff absolutely does not exist. Meng Qinguo, Dean of the Law School at Guangxi University, said that once the rumor about Sany optimizing 30% of its employees is confirmed, it would certainly fall under the 'other important information that has a significant impact on securities trading prices' as stipulated in China's Securities Law, and also constitute a major event that must be disclosed under the Shanghai Stock Exchange's Listing Rules.
According to media reports, due to changes in Sany's sales model, more than 3,000 people were converted from Sany employees to agents. Legal experts believe that this major shift from direct sales to agents may directly affect the accuracy of sales revenue and inventory data in the company's financial statements. The dozens of sales companies that sell Sany Heavy Industry products are basically re-registered companies of Sany's former regional branches. Among them, Deng Fuyi, Chairman of Jiangsu Sany Engineering Equipment Co., Ltd., and Yu Mingzhong, Chairman of Beijing Sany Engineering Machinery Co., Ltd., also serve as assistants to the President of Sany Heavy Industry. Through the so-called restructuring, the sales system operates outside the normal framework, objectively turning the sales system into customer terminals. Sales that originally required actual purchases by users to be counted as sales performance can now be completed with the 'help' of sales companies under their control, and the 'numbers game' in sales is suspected of inflating revenue. How much discrepancy exists between facts and speculation remains to be assessed.
The reporter also compiled the stock price increases of relevant construction machinery listed companies, the Shanghai Composite Index, and the Dazhihui Machinery Sector Index from the end of Sany's extraordinary general meeting on December 21, 2012, to before the Spring Festival on February 4, 2013 (a total of 28 trading days). The data shows that Sany Heavy Industry's stock price increase was significantly higher than that of the Shanghai Composite Index and the industry machinery sector index.
After the extraordinary general meeting, Sany Heavy Industry's stock price rose by 34%, far exceeding the 14% increase of the Shanghai Composite Index during the same period, and also far exceeding the 11% increase of the Dazhihui Machinery Sector during the same period. If calculated from December 4, 2012, Sany Heavy Industry's stock price surged by 73% in a short period. It is puzzling that this stock price increase occurred against the backdrop of Sany Heavy Industry's fourth-quarter loss of 188 million yuan.
Obviously, from the actual situation of the stock price anomaly, the rumor information about Sany Heavy Industry cutting 30% of its employees meets the definition of insider information under Article 9 of the 'Guidelines for the Identification of Insider Trading in the Securities Market (Trial),' which states that 'once the relevant information is made public, the trading price of the company's securities will significantly deviate from the market index or relevant sector index for a period of time.'
Article 76 of China's Securities Law stipulates that 'insiders who have access to insider information on securities trading and persons who illegally obtain insider information shall not, before the insider information is made public, buy or sell the company's securities, or disclose the information, or advise others to buy or sell the securities.' There are rumors that someone has reported Sany's irregular disclosure to the securities regulatory authorities. Whether the whistleblower is from within Sany or the industry, whether the regulatory authorities have received the report, and what the outcome is, all remain unknown.
In fact, disguised layoffs in the construction machinery industry are by no means isolated. Not long ago, Rongsheng Heavy Industries, a leading domestic private shipbuilder, was exposed in a labor dispute. Although the company stated it is 'undergoing transformation and upgrading, and needs to optimize the existing personnel structure,' employees revealed that the so-called optimization actually involves 'job transfers, salary cuts, rotating shifts, labor discipline checks, and delayed wages' to make employees resign voluntarily and avoid paying large compensations.
Layoffs in the Construction Machinery Industry Also Exposed in Early July 2012
According to a July 2012 report: Sany Group, China's largest construction machinery manufacturer by revenue, is cutting staff. As construction growth slows, some businesses of Chinese heavy machinery manufacturers such as Sany, Zoomlion, and Shantui are experiencing sales declines.
A Sany employee told the Financial Times that the R&D, sales, and manufacturing departments are all cutting staff, and it started 'some time' ago. Analysts at Credit Suisse in Hong Kong said in a research note that Sany management confirmed some positions were cut but did not specify the number.
Sany stated that since 2011, facing the reality of slowing industry development, the company has consciously controlled employee growth. However, Sany denied large-scale layoffs, saying the current situation is 'normal (employee) attrition.' The company said that given it had 51,000 employees at the end of 2011, with a normal attrition rate, it should lose 2,500 to 5,000 employees annually.
A Zoomlion representative explicitly stated that Zoomlion will absolutely not lay off employees, and according to business development needs, they are still recruiting. By the end of June 2012, Zoomlion's total number of employees had grown from 28,800 to over 30,000. Nearly a thousand new graduates recruited this year have reported to the company and are undergoing orientation training. XCMG's HR leadership also denied any layoffs.
What is the Purpose of Exposing Layoffs?
In a market economy, appropriate personnel flow is very normal and nothing to hide. If a company lays off employees for its own survival and development, as long as it is reasonable, sensible, and legal, it can have a clear conscience, and everyone, including employees, has nothing to say.
In both 2012 and 2013, in the same season and the same month, layoffs in the construction machinery industry were exposed in early July. Is this a coincidence?
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