Turkish-Qatari company BMC facing liquidity problems

ANKARA – Leading armored vehicle maker BMC, a Turkish-Qatari company, is facing cash flow problems after a recent change in ownership, Defense News has learned.

The company, which has a multibillion-dollar contract in its portfolio to produce the Altay, Turkey’s first next-generation indigenous tank, is on a phase of shrinking of unknown magnitude, company sources said. , speaking on condition of anonymity while discussing internal details.

A union representative said the company recently laid off nearly 30 white-collar workers. Blue collar workers fear collective dismissals or unpaid leave.

The union representative also indicated that some production units have gone from three shifts per day to one shift. BMC has also stopped producing its civilian TuÄŸra truck.

The construction of a large production unit in Karasu, Sakarya, in northwestern Turkey, has been halted for financial reasons. Subcontractors complain about unpaid invoices.

“Cash flow is low to support operations at the enterprise level,” admitted a BMC official. “We hope this is only a temporary situation.”

Another BMC official blamed the company’s massive debt outstanding at the time of the takeover. “We have taken over a stock of debt which has become a challenge to be managed,” he said. “The company needs significant new contracts.

BMC has a politically controversial history. In 2014, Es Mali Yatırım Danışmanlık from businessman Ethem Sancak bought out BMC, then a struggling armored vehicle manufacturer, for $ 350 million. BMC had been seized by the government bank fund for unpaid debts from its former owner worth $ 75 million.

Sancak, a close associate of President Recep Tayyip Erdoğan, served on the boards of the ruling Justice and Development Party (AKP) in Erdoğan. Talip Öztürk, a distant relative of Erdoğan, invested $ 100 million in BMC to become a Sancak partner.

ErdoÄŸan also negotiated a deal in which a Qatari fund invested $ 300 million to buy a 49.9% stake in BMC. Sancak now owned 25% of BMC and had already raised $ 50 million net for the entire company.

In a deeply controversial move, ErdoÄŸan’s government allocated 544 acres of public land (in Karasu, Sakarya) to BMC to be used in the company’s future investments. Subsequently, BMC defeated two local rivals and won a strategic contract for the initial production of a batch of 250 Altay tanks. Defense industry sources estimate the Altay contract, involving a possible 1,000 units, to be worth around $ 11 billion.

In May 2018, the government granted 1.4 billion Turkish liras (approximately $ 250 million) in investment incentives to BMC for the Altay program, including tax cuts, pension premium reductions, subsidized energy and benefits. The government also awarded, under a free agreement, a factory for the production and maintenance of military tanks in Arifiye near Istanbul to BMC. The company was only forced to invest $ 50 million in exchange for the right to operate the Arifiye plant for 25 years. Turkish opposition parties wanted a parliamentary inquiry into BMC’s history, but the effort was rejected by ErdoÄŸan’s AKP.

Based on 2020 defense revenue, BMC ranked 89th in Defense News’ annual Top 100 ranking with the equivalent of approximately $ 533 million.

In May 2021, Sancak and Öztürk sold their 50.1% stake in BMC to Turkish steel producer Tosyalı Holding for $ 480 million.

Tosyalı Holding is a major producer of iron and steel, which also has close ties with Erdoğan. Tosyalı operates three facilities on three continents and produces six million tonnes of steel per year. The company employs more than 10,000 people. Its other business interests include shipping, port operations, foreign trade and power generation.

Could the Altay contract not help BMC? “Even though production has started today, deliveries cannot take place for five years,” said a senior engineer from BMC.

The Altay program also has its own problems. It suffered significant delays due to the failure to access important components such as the engine, transmission and armor. In March, BMC was in talks to strike strategic twinning agreements with two South Korean companies for joint work on a power pack for the next-generation tank. Under the agreements, South Korean manufacturers Doosan and S&T Dynamics would supply the engine and transmission mechanism for the Altay.

“We are still in talks … so far unable to reach an agreement,” said the chief executive of BMC.

As of October 14, BMC had not responded to Defense News’ request for comment.

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