One wave is not flat, another wave rises. On October 30, Gree Electric Appliance was exploded. Due to the quality problem of dehumidifier, it was fined US $91 million, about 580 million yuan by the US Department of justice. Public opinion continues to erupt and crises are intertwined. Prior to this, Gree Electric released its third quarter financial report. Among them, Gree's operating revenue in the third quarter was 47 billion yuan, a year-on-year decrease of 15%, and its net profit was 6.188 billion yuan, a year-on-year decrease of 15.66%, which delayed the first half of the year. In vertical comparison, Gree's profitability has declined significantly. On the one hand, Gree's net profit of 15.6 billion yuan in the first three quarters returned to the level of 2017, down 40.6% from 26.32 billion yuan in the same period in 2019 before the epidemic; On the other hand, in the first three quarters, Gree's return on net assets was 15% and its gross profit margin was 24%, while in the same period in 2017, Gree's return on net assets was as high as 25% and its gross profit margin was 31%. Subsequently, the share price of Gree Electric Appliance fell 5.67%, hitting a new low of 36.60 yuan during the year, down 47.5% from the highest point of 67.78 yuan in 2020. Once the share price returned to two years ago. Gree in the storm, all kinds of problems were pushed to the stage, and had to face all kinds of secrets that had been hidden. Everything has long been out of control. Spend 1.58 billion to buy a lesson On October 29 local time, the U.S. Department of Justice announced on its official website that Gree Electric and the U.S. Department of justice had reached a delayed prosecution agreement (DPA). Court documents show that Zhuhai Gree, Hong Kong Gree and Gree's subsidiaries in the United States know that their dehumidifiers are defective and do not meet applicable safety standards, which may cause a fire, but these companies delayed reporting this information to the U.S. Consumer Product Safety Commission for six months. These companies only reported and recalled these dehumidifiers after increasing consumer complaints about fires and injuries caused by them. Gree agreed to accept a total fine of 580 million yuan and provide compensation to any uncompensated victims of the fire caused by the company's defective dehumidifier. As of November 1, all the fines had been submitted. DPA document signed by Dong Mingzhu The key to this announcement is the "extension". In fact, this is an old thing eight or nine years ago. According to various data, the dehumidifier involved was produced and exported by Gree from 2005 to 2012. It received an accident complaint in 2012, but Gree did not report to the U.S. Consumer Product Safety Commission (CPSC) until June 2013. In September 2013, Gree recalled about 2.25 million dehumidifiers sold in the United States and Canada from January 2005 to June 2013, involving 12 brands such as soleusair, Kenmore and Frigidaire. Then, Gree Electric was sued by CPSC for failing to declare in time. The two sides reached a civil settlement in 2016, and Gree Electric paid a fine of US $15.45 million. Soleus, the shareholder of its U.S. subsidiary, also sued Gree for compensation of US $150 million in 2015. After another year of appeal negotiation, the two sides reached a settlement on the last day of 2016, and the specific amount of compensation was not disclosed. In 2017, the federal prosecutor's office of central California (DOJ) also imposed a fine of US $75.75 million on Gree Electric. These fine items were fully written into Gree's annual report or semi annual report from 2013 to 2016. With the sum of 1 billion yuan of equipment recalled, Gree Electric has paid at least 1.58 billion yuan for this batch of unqualified dehumidifiers. The production and sales of these dehumidifiers took place before Dong Mingzhu took over Gree Electric Appliance, but the mess really fell on Miss Dong. The new official took office three fires, and the first one burned small household appliances. According to China business daily, Dong Mingzhu at that time believed that the small household appliance business incorporated into gree in 2004 was really "chicken ribs" - the quality was difficult to control, the fines were small, the reputation of Gree was damaged, and the foundation of air conditioning was moved. However, the small household appliance business still has a certain market, "tasteless food, a pity to abandon". Dong Mingzhu's negative attitude towards small household appliance business has laid the business pattern of Gree. In order not to let small household appliances affect Gree's brand image, since 2013, Miss Dong has established a subsidiary "DASONG" to change the brand of small household appliances. The wishful thinking knocks loudly. DASONG is DASONG. It's none of my Gree air conditioner business. After the change of name, Gree Electric did not devote more efforts to the small household appliance business, and the marginalized status of small household appliances in Gree Electric remained unchanged. In view of Gree's "half giving up" attitude towards small household appliances, some people in the industry once believed that the seasonal characteristics of the air conditioning industry are obvious, so Gree needs other products to supplement in the off-season of air conditioning sales and does not idle Gree's strong sales channels. Gree Electric's policy of "emphasizing air conditioning over everything" in exchange for the first domestic air conditioning market share for 24 years. Before 2020, Miss Dong has been deeply affirmed by the market under the shadow of this glory. According to the data of HVAC information, in 2019 before the epidemic, Gree central air conditioning accounted for 14.7%, ranking first; In addition, according to the market data of ovicloud, Gree's retail sales of household air conditioners accounted for 36.83% in 2019, ranking the top 1 in the offline market share of domestic household air conditioners. Among the 20 best-selling air conditioners in the offline market, 12 came from Gree. The portrait of spokesperson Miss Dong has been posted all over the home appliance market. Ten years is too long Whether it is correct or not is relative. 2019 is the afterglow of Gree air conditioner highlight. From the financial report, the revenue of Gree air conditioner in 2019 increased by only 30 million over the previous year, and the double-digit growth rate in the past few years suddenly fell to the sky. Gree air conditioner finally hit the ceiling. In recent years, Gree air conditioner has dominated the market, and Midea, the "second child of the Millennium" in the air conditioning market, has constantly added small household appliances. Around 2014, the consumption of small household appliances began to shift online, and then ushered in the burst of traditional e-commerce and the subsequent two batches of traffic dividends of content e-commerce. Stepping on the east wind, Midea, Supor and Jiuyang's small household appliance business has entered a period of rapid growth. During the same period, the online war of Daiichi also slowly burned online. In 2013, Suning put forward the "cloud business model", that is, the expansion of all categories on home wires. In September of the same year, Suning Tesco will continuously enrich platform department stores, supermarkets and other non electrical products by attracting third-party sellers, and successively acquire multiple express companies to improve the logistics distribution of large household appliances. At that time, chain super giants Suning and Gome transformed e-commerce. Dong Mingzhu withdrew from Suning in a rage because of Suning's unauthorized price adjustment, missing the traditional e-commerce outlet. In February 2014, Suning and Midea signed a three-year strategic cooperation agreement. The two sides plan to cooperate to sell 60 billion yuan from 2014 to 2016, and carry out the promotion activity of "competing for Midea in Suning" - Midea seized the initial dividend of traditional e-commerce, and its online share continued to rise. At that time, Gree, relying on its huge offline distribution network, was still the "king of air conditioning". In 2018, Dong Mingzhu was interviewed by Wu Xiaobo's column "twenty people in ten years" and asked whether there will be great changes in the air conditioning industry in the next five years. Miss Dong answered confidently, "Gree is the boss in how the industry changes." In 2020, COVID-19 changed everything. COVID-19 seriously hit the offline sales, but gave the online sales a rapid growth window. The net profit of Gree Electric Appliance in the first quarter of fiscal year 2020 decreased by more than 70%. An investor asked Dong Mingzhu whether she would try to broadcast live, but she said: "if the transformation is online, more than 600000 employees in offline stores will lose their jobs. Offline stores are Gree's core competitiveness." As soon as the voice fell, Dong Mingzhu walked into the live broadcasting room. Dong Mingzhu live broadcast with goods In 2020, Gree held 13 live broadcasts, with goods of 47.6 billion yuan, accounting for 40.38% of Gree's annual air conditioning revenue. As Dong Mingzhu expected, the dealer brothers quit. The withdrawal of dealers directly disintegrated the offline retail network established by Gree for many years. This also makes Gree's financial situation worse. Dealers used to digest the inventory, but the report in the third quarter of this year shows that the inventory of Gree Electric Appliance has reached 39.675 billion yuan, an increase of 43.31% compared with the same period last year, and an increase of 53.13% compared with the 25.910 billion yuan reported at the beginning of this year; Long term borrowings soared to 8.84 billion yuan from 1.57 billion yuan in the same period last year, while notes payable soared to 40.816 billion yuan from 21.427 billion yuan at the beginning of the year. Growth of inventory and prepayment of Gree Electric Miss Dong was caught in a dilemma when she missed the e-commerce outlet. But she must do so, because the enemy has gone deep into the hinterland. According to the semi annual report of Gree and Midea in 2020, Gree's air conditioning business has been opened by Midea for 22.7 billion yuan, and Gree has lost the throne of "air conditioning king" for 24 years. This figure was successfully narrowed in the second half of this year. The annual reports of the two companies in 2020 showed that Gree air conditioner's annual revenue fell behind Meimei's 3.333 billion yuan. By the first half of this year, the gap had widened to 9.21 billion yuan. Dong Mingzhu may never think of it. It was a decision that today's Gree air conditioner needs to "catch up" with Meimei air conditioner. It's a shame. Time told Miss Dong, there is another thing: small household appliances are really a good business. In April 2020, she said publicly, "it's very good to make small household appliances this year. You may turn on the TV and find that this small thing is very fun. You can buy one for two or three hundred yuan. If 100 million people buy it, there will be a market of tens of billions. Like our 1.4 billion population, we have an average of 100 yuan per person, which is 140 billion yuan." It smells good. A disappointing spokesman The single sales channel and business format makes Gree's pressure resistance significantly weaker than that of its peers. This summer, because the epidemic situation was repeated and the temperature was lower than in previous years, the property market was strictly controlled by policies, the transaction volume of commercial housing decreased sharply, and the sales of air conditioning were quite cold. According to the data of ovicloud, in the domestic air conditioning retail market in the third quarter of 2021, the online retail volume and offline retail volume decreased by 10%, while from January to September this year, the offline and online retail volume of the air conditioning industry decreased by 9% and 5% respectively. While sales are declining, the cost of air conditioning is increasing. This year, the price of raw materials has been rising. The copper, steel, aluminum and plastics required for most white appliances have increased by more than 30% over the same period last year. Among them, the price of copper with large air conditioning consumption has increased by 100% this year. Affected by this, home appliance enterprises including Haier, Midea and oaks announced price increases. However, Gree announced that it would not adjust prices. In order to absorb the impact of the rise of upstream raw materials, Gree has continuously expanded a large number of raw material futures hedging business this year, which is reflected in the financial report. The interest expenditure of gree in the first three quarters of this year was 510 million, a 23 times increase from 22.413 million in the same period last year. Gree's interest expense in the third quarter of 2021 But facts have proved that Dong Mingzhu's adherence to the principle of "no price increase" has not won the favor of consumers. On the contrary, the gap between Dong Mingzhu and her old rival Meidi is widening. The air conditioning business fell to the altar, causing more chain reactions. The most serious one is the market's disappointment with Gree, which has quickly evolved into despair. K line shows that Gree's decline has been revealed since the end of this year, while the number of shareholders has been rising all the way. Combined with the financial report, the number of shareholders of gree in the first quarter of this year was 468600, which had increased to 714700 in the second quarter, and 888000 in the third quarter, with a narrow increase. Gree Electric's share price trend this year In other words, 420000 people tried to copy the bottom of Gree this year, but they finally found that the decline was endless. In addition to the wait-and-see retail investors, Gree's shareholders have long been unable to restrain themselves. In the third quarter, state-owned assets