About

Listed on the Hong Kong Stock Exchange since 2013, U.S. based Nexteer Automotive is a leading manufacturer of steering and driveline products. It is the world’s fourth largest supplier of steering parts by market share and serves over 50 major automakers globally.

The challenge

Prior to 2015, Nexteer’s three onshore entities in China relied heavily on U.S. dollar (USD) intercompany loans from its treasury headquarters to support day-to-day operational needs. As a multinational corporation (MNC) operating in China, each onshore entity was subject to a limit on the amount of debt that it could borrow from foreign-based entities. This created inefficiencies in funding the business as well as challenges to Nexteer’s ambitious expansion plans in China.

The opportunity for Nexteer to revisit its cash structure came in 2015, when the China State Administration of Foreign Exchange (SAFE), as part of the Chinese government’s push to liberalize the financial industry, relaxed its rules around foreign debt quotas. Nexteer hoped to leverage the easing regulation to create a centralized treasury structure and achieve greater cost efficiencies.

The J.P. Morgan solution

Nexteer chose to partner with J.P. Morgan for the bank’s wide spectrum of product capabilities and deep understanding of Nexteer’s business. J.P. Morgan, in close collaboration with Nexteer and its local banking partner Bank of China, designed a USD cash pooling structure for the auto part maker’s operating entities and holding companies in China. It also secured approval from SAFE and implemented the solution within a short period of time.

The solution was tailored to Nexteer’s unique business needs and cash management objectives and yielded several benefits:

• As head of the cash pool, Nexteer Auto (Suzhou)—Nexteer’s holding company in China—can borrow from headquarters and offshore entities against a consolidated short-term foreign debt quota of its onshore entities.
• All three onshore entities in China can consolidate their cross-border foreign debt quota into Nexteer Auto (Suzhou) as the lead company.
• Nexteer can facilitate day-to-day USD operating needs through the arrangement of a USD domestic physical cash pool for its entities based on an entrustment loan framework for two-way domestic sweeps.
• Nexteer can further optimize capital by lending any surplus funds to its offshore entities through the lead company.

This webpage was prepared exclusively for the internal use of the J.P. Morgan client to whom it is addressed (including the client’s affiliates, the “Company”). This webpage is incomplete without reference to, and should be viewed solely in conjunction with, the oral briefing provided by J.P. Morgan.
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J.P. Morgan is a marketing name for the Treasury Services businesses of JPMorgan Chase Bank, N.A. and its affiliates worldwide.