Caterpillar Inc, the world's largest manufacturer of mining and construction equipment, said yesterday that its internal investigation has revealed a gross ''accounting misconduct'' at a recently bought Chinese company.
The discovery has led the US machinery giant to write-down most of the value of its acquisition of coal mining company ERA Mining Machinery and its subsidiary Zhengzhou Siwei Mechanical & Electrical Manufacturing (Siwei), which amounts to approximately $580 million, according to a company statement.
The non-cash impairment charge is expected to wipe off the company's fourth quarter profit by more than a half.
Caterpillar has removed several senior managers at Siwei who were found responsible for the fraud and moved the responsibilities for Siwei manufacturing operations to the company's China operations division.
The company's chairman and CEO Doug Oberhelman said: ''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, which is spelled out in Caterpillar's worldwide code of conduct.''
Peoria, Illinois-based Caterpillar acquired ERA, a Hong Kong-listed company along with its subsidiary Siwei in June 2012.