Sanlu Group May Face Bankruptcy

October 1, 2008 12:00 pm Last Updated: October 1, 2015 10:46 pm
A super market in Jakarta removed all dairy products imported from China. (ADEK BERRY/AFP/Getty Images)
A super market in Jakarta removed all dairy products imported from China. (ADEK BERRY/AFP/Getty Images)

The Sanlu Group, the source of tainted powered milk, will pay huge refunds and even medical bills for babies suffering from kidney-stones. Sanlu, facing the fate of bankruptcy, would layoff 30,000 employees. Those who would be impacted nationwide may reach 350,000.

Hong Kong’s Ta Kong Po online newspaper quoted a source as saying that the communist regime has frozen various Sanlu accounts amounting to 800,000,000 yuan (approx. US$116,876,000). It was estimated that Sanlu would recall the powered milk, as much as 10,000 tons and pay compensation of up to 700,000,000 yuan (approx. US$102,277,000). Most of the hospital bills for babies suffering from kidney stones would also need to be reimbursed.     

According to the source, the operating line of credit was drained completely to pay compensation claims. The local banks refused to provide any financial assistance and requested Sanlu Group return the loaned money.

The Sanlu Group has not recalled liquid milk yet. It will need much more money to pay for the damages if it begins to recall this product.

In addition, Sanlu will be responsible for victims’ hospital bills. An insider told Finance Magazine that one officer sent Sanlu Group a message that the hospital bills for treating the babies who suffered from kidney stones, would be reimbursed Sanlu.  

Sanlu could possibly pay 100,000,000 yuan (approx. US$14,610,000) if each victim’s hospital expenses amount to 10,000 yuan (US$1,461); Sanlu might have to sell assets, including production facilities if it recalls liquid-milk products in the near future.  

The insider said, “The brand is not worth a damn right now, which used to be worth one billion. A company won’t survive without funds and a brand.”

Although those on the outside are pessimistic about the Sanlu’s future, Salu’s executive officers say that their employees were paid as before this month and they [employees] had “settled their minds.”

It is said that Sanlun Group and its manufacturing divisions have nearly 10,000 employees and 30,000 including sales persons. If the Sanlun Group files for bankruptcy soon, they would layoff about 350,000 people across the country.

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