QC court places Daikin-Alen under receivership

Daikin-Alen Airconditioning Corp., has been placed under receivership by the Quezon City Regional Trial Court to prevent further dissipation of its assets allegedly due to mismanagement by the Japanese firm controlling the local airconditioning company.

The order was in response to a complaint filed by Alfredo Lagman Jr., president and chief executive officer of Alen International Industrial Corp. (AIIC), which owns 40 percent of Daikin-Alen. In his complaint, Lagman alleged that AIIC’s Japanese partner Daikin Industries Ltd. has engaged in fraudulent schemes to cause the collapse and ultimate demise of the Alenaire brand.

Appointed as receiver is Danilo Concepcion, a former associate commissioner of the Securities and Exchange Commission (SEC). Aside from preserving the assets of Daikin-Allen, Concepcion was ordered by the court to immediately look into the alleged irregularities committed by the company’s directors and officers.

Daikin-Alen was formed in 1998 by virtue of an agreement signed by AIIC and Daikin. Under the agreement, Daikin shall hold 60 percent while the balance shall be held by AIIC. With a bigger share, Daikin is authorized to nominate the President and four out of the seven members of the board of Daikin Alen.

Under the agreement, Alenaire products will be produced locally by Daikin-Alen while Daikin products will be imported from Daikin or its affiliates/subsidiaries abroad.

Before entering into the joint venture with Daikin, AIIC was a recognized leader in the local air conditioning industry operating under the brand name "Alenaire." Since its beginnings in 1964 as a 100-percent Filipino-owned enterprise, Alen developed and adopted its own technology for producing air conditions and related products of world-class quality.

It was commended as the 1996 Golden Shell Awardee for Manufacturing Excellence and is one of the country’ s top 1,000 corporations.

AIIC has also consistently posted increases in its sales and profits for the period 1990 to 1996. From only P7.65 million in 1990, the company’s net income has grown to P16.14 million in 1996. Sales likewise surged to P427 million in 1997 from only P92.5 million in 1990.

AIIC credits this to its extensive marketing network. As a result of the significant gains it made, AIIC has successfully penetrated markets overseas by exporting to Thailand, China, Hong Kong, Brunei, Malaysia and Guam.

To further expand its reach, AIIC forged a joint venture with Daikin.

AIIC said only after six years in operations did it realize that Daikin through its designated officers and directors resorted to fraudulent devices to destroy the good name of Alenaire.

In issuing the order, Judge Bruselas of the Quezon RTC considered Daikin-Alen’ s deteriorating financial condition. Based on the financial statements submitted, Daikin-Alen has incurred a rapid increase in its deficit to P187.52 million as of end-March 2004 from only P8.26 million in 1999.

The court has enjoined Daikin-Alen, its officers and directors from selling or transferring company assets.

The court has also directed Concepcion to submit a written report of his findings with respect to the allegations and the state of the assets of Daikin-Alen within 60 days from his assumption in office.

AIIC claimed that Daikin adopted irregular accounting practices intended to increase the costs of Alenaire products and decrease the costs of Daikin products to justify a price increase for Alenaire products. This translated to the reduction of sales of Alenaire products due to higher prices, while Daikin products became more competitive as they enjoyed the advantage of reduced prices.

In particular, AIIC alleged that Hideki-Nishimura, currently president of Daikin-Allen, deliberately mismanaged the business of the company to the detriment of Alenaire.