CMC Motors closes down, to retrench employees

CMC Motors Group is set to shut down 11 years after it was acquired by Dubai-based Al Futtaim Auto & Machinery, with the decision resulting in job losses and leaving its agricultural equipment franchises up for grabs. 

The company, which was acquired by Al Futtaim for Sh7.5 billion in 2014, exited the passenger car business in 2023 to focus on selling agricultural equipment including New Holland tractors.

CMC says the strategic shift has not been enough to shield it from a tough business environment, leading to the decision to shut down.

“CMC Motors Group has announced its decision to gradually wind down operations in Kenya, Tanzania and Uganda in full compliance with local regulations and distributorship agreements,” the company said in a statement yesterday.

“This decision follows a thorough evaluation of the business in light of sustained market challenges, including economic pressures, currency depreciation, and rising operational costs.”

CMC added that it is supporting its employees during the transition and will ensure there is an orderly wind down in adherence to all relevant agreements and regulations.

Clear remaining stock 

The company had already laid off 169 workers in 2023 when it was clearing its remaining stocks of vehicles under the Ford, Mazda and Suzuki franchises which were transitioning to new dealers.

It was not immediately clear whether Al Futtaim has identified a buyer for CMC’s assets which include land holdings in Nairobi.

The closure of the business highlights the losses Al Futtaim has suffered after paying a substantial premium for CMC which was previously listed on the Nairobi Securities Exchange (NSE).

The multinational paid Sh13 for each share of CMC, valuing the deal at Sh7.5 billion which was 68.8 times the net profit of Sh110 million that the company reported in the year ended September 2013. 

The price was also Sh1.7 billion higher than CMC’s net assets of Sh5.8 billion at the time.

Boardroom wars

The buyout marked a relief to former investors of CMC that had been rocked by boardroom wars after revelations of self-dealing by some of its previous directors and senior managers.

Those who were bought out included billionaires Peter Muthoka, Paul Ndung’u, Joel Kibe and the late Jeremiah Kiereini.

Mr Muthoka was paid Sh1.8 billion while Mr Kiereini earned Sh947 million.

Mr Kibe and Mr Ndung’u earned a combined Sh869 million for their direct stakes in CMC.

The late Charles Njonjo, Mr Kiereini and former long serving chief executive of CMC, Martin Forster, were among a small circle of individuals who received payments from off-shore accounts funded by over-invoicing the Kenyan company.

Details of the illicit transactions were disclosed by a forensic audit whose trail started with the list of beneficiaries that Mr Forster left in a safe at his Lusaka Road office when he was sacked on March 14, 2011.

Global automakers including manufacturers of Land Rover, Nissan Diesel (UD) and Suzuki would overcharge CMC by a margin of between 1.5 and two percent, with the excess payments funneled to off-shore accounts which were controlled at various times by multiple individuals including Mr Forster, Mr Kiereini and Mr Njonjo.

Mr Forster later described the allegations as a witch-hunt, adding that he left the documents behind because the money belonged to CMC.

The wrangles that rocked CMC ahead of the buyout by Al Futtaim led to scores of automakers terminating their distributorship agreements with the dealer which previously had the most diverse motor vehicle brands including Jaguar Land Rover, Ford, Volkswagen, Nissan Diesel (UD) and MAN trucks. 

The brands are now scattered among various dealers including Inchcape Kenya, Caetano Kenya and CFAO Mobility Kenya.