Bicycle Crash

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After Millions Go Missing, Bike Maker Mifa Pedals into Uncertain Future

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A flat tire for investors?
  • Why it matters

    Why it matters

    East Germany’s Mifa was just beginning to reinvent itself as an electric bikes specialist. But state investigators are now investigating the former chief executive over possible fraud, raising questions of the standards of oversight and record keeping at the company.

  • Facts

    Facts

    • German state prosecutors have launched a criminal investigation to determine if the company defrauded investors.
    • Hero Cycles gains valuable technology and manufacturing prowess for its €19 million investment, but painful cuts loom.
    • Mifa’s predecessor VEB-Fahrradwerken was the largest bike maker in communist East Germany.
  • Audio

    Audio

  • Pdf

Everyone can misplace their wallet once in awhile, but German  bicycle manufacturer Mitteldeutsche Fahrradwerke (Mifa) has seen €15 million ($19.7 million) simply vanish from its 2013 balance sheet.

Based in the eastern German town of Sangerhausen, Mifa says the discrepancy was caused by bad accounting procedures. But state prosecutors in Halle have confirmed to Handelsblatt that they are launching an investigation into the roles played by Peter Wicht, who was the chief executive officer from 2004 until his sudden departure in April for “health reasons,” and others affiliated with the company.

“We are investigating because of possible offenses against corporation law and other criminal offenses,” a spokeswoman for the prosecutor’s office said. At issue is whether investors were purposely deceived or defrauded. Mr. Wicht was not available for comment.

Word of the official inquiry comes as India’s Hero Cycles Ltd., the largest maker of bicycles in the world, has announced it will acquire a controlling 60 percent interest in Mifa for €19 million. Creditors had given Mifa until August 25 to find a solution to its financial woes.

With about 770 workers, Mifa rose from the ashes of the VEB-Fahrradwerken, which was once the largest bicycle maker in communist East Germany. Following years of difficult downsizing and restructuring in the wake of German reunification in 1990, the firm had begun to expand greatly recently, with an emphasis on producing electric bicycles. Hero Cycles would gain access to that technology, which would give it an even stronger position in a market for bikes estimated at €37.1 billion worldwide.

Triggering the investigation were concerns about the issuance of a corporate bond in summer 2013. The company has said it will be “fully cooperative and do everything necessary to support the investigations.”

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