Company’s financial crisis makes the LeEco CEO cut his own salary to 15 cents a year
Chinese conglomerate LeEco, who is known for making business investments in everything from movies, to smartphones, to electric cars is facing cash shortage and suffering from expanding too fast. As a result, the company’s CEO Jia Yueting in a letter to his staff has announced cutbacks and limits on spending.
Jia, who funded LeEco back in 2002, said the company needed to ensure that its financial arm was able to “catch up to the growing need for cash”, and warned that LeEco’s organizational structure was “lagging behind” the firm’s fast development.
“We are starting to see signs of big company disease, such as low individual performance and organizational redundancies,” Jia said in the letter.
“In order to realize the rapid and positive growth of the Eco operation, we will cut costs to reinforce the awareness of capital control and efficient operation.”
To help fund LeEco’s push into electric vehicles, Jia’s sister sold her stake in the company and loaned money to him interest-free. Jia himself also sold part of his own stake. It also purchased Vizio for $2bn in July, as well as setting up headquarters in Silicon Valley.
In a letter to shareholders, Jia apologized to them and highlighted LeEco’s progress and achievements as well as its financial and organizational pressures.
“No company has had such an experience of being caught in both ice and fire. We overextended our global strategy and spent recklessly on expanding our business scale when our capital and resources were in fact limited. LeEco will quit the expansion strategy at the cost of burning money … and instead focus on the existing market.”
Jia said in the letter that he and his management team would take “full responsibility” for the situation and that he will limit his own salary to 15 cents (1 yuan) per year. He also promised to give more attention to the listed subsidiary, which operates smart TV platform LeTV. He added the firm would look to integrate other parts of the business into the listed unit.
Jia said the future will be better for LeEco, and ended his memo with a poem urging employees to look to “a brighter future after the storm.
The CEO’s letter to employees that went public saw a sharp fall in share prices in LeEco’s two listed units – Coolpad Group (CHWTF) and Leshi Internet Information & Technology. However, some of the losses were recovered on Tuesday.