ANKARA – Leading armored vehicles maker BMC, a Turkish-Qatari venture, is going through liquidity snags after a recent change in ownership, Defense News has learned.
The company, which has a multibillion-dollar contract in its portfolio to produce the Altay, Turkey’s first new-generation, indigenous tank, is on a shrinking stage of unknown scale, company sources said, speaking on condition of anonymity while discussing internal details.
A trade union representative said that the company recently laid off nearly 30 white-collar workers. Blue-collar workers fear mass redundancies or unpaid leaves may follow.
The trade union representative also said that some production units went from three shifts a day to single shift. BMC has also ceased producing its civilian Tuğra truck.
Construction of a large production unit in Karasu, Sakarya, in northwestern Turkey, came to a halt due to financial reasons. Subcontractors complain of unpaid bills.
“Cash inflows are weak to support corporate-level functioning,” one BMC official admitted. “We are hoping that this is only a temporary situation.”
Another BMC official put the blame on the company’s massive debt stock at the time of the takeover. “We took over a debt stock that has become a challenge to manage,” he said. “The company needs new and sizable contracts.”
BMC has a politically controversial history. In 2014, businessman Ethem Sancak’s Es Mali Yatırım Danışmanlık company purchased BMC, then a troubled armored vehicles maker, for $350 million. BMC had been seized by the government’s banking fund for its former owner’s unpaid debts worth $75 million.
Sancak, a close aide of President Recep Tayyip Erdoğan, served at top boards of Erdoğan’s ruling Justice and Development Party (AKP). Talip Öztürk, a distant relative of Erdoğan, invested $100 million in BMC to become partners with Sancak.
Erdoğan also brokered a deal in which a Qatari fund invested $300 million to buy a 49.9% share in BMC. Sancak now owned 25% of BMC and had already raised a net $50 million for the entire venture.
In a deeply controversial move, Erdoğan’s government allocated a 544 acres of public land (in Karasu, Sakarya) to BMC to be used in the company’s future investments. Subsequently BMC defeated two local rivals and won a strategic contract for the initial production of a batch of 250 Altay tanks. Defense industry sources estimate the Altay contract, involving an eventual 1,000 units, to amount to around $11 billion.
In May 2018 the government granted 1.4 billion Turkish lira (approximately $250 million) investment incentives to BMC for the Altay program, including tax cuts, pension premium reductions, subsidized energy and perks. The government also allocated, in a gratis deal, a military tank production and maintenance factory in Arifiye near Istanbul to BMC. The company was only obliged to invest $50 million in return for a right to operate the Arifiye plant for 25 years. Turkey’s opposition parties wanted a parliamentary investigation into the BMC story but the effort was voted down by Erdoğan’s AKP.
Based on 2020 defense revenue, BMC ranked 89th in the Defense News Top 100 annual rankings with the equivalent of about $533 million.
In May 2021, Sancak and Öztürk sold their 50.1% share in BMC to a Turkish steel producer, Tosyalı Holding, for $480 million.
Tosyalı Holding is a leading iron and steel producer, which also has close ties to Erdoğan. Tosyalı operates three facilities on three continents and produces six million tons of steel annually. The company employs over 10,000 people. Its other business interests include maritime, port operation, foreign trade and power generation.
Could the Altay contract not come to BMC’s help? “Even if production started today, deliveries cannot take place before five years,” a senior BMC engineer said.
The Altay program has its own problems, too. It has faced major delays due to failed access to significant components like the engine, transmission and armor. In March, BMC was in talks to pen twin strategic agreements with two South Korean companies for joint work on a power pack for the new-generation tank. Under the deals South Korean manufacturers Doosan and S&T Dynamics would supply the engine and transmission mechanism for the Altay.
“We are still in talks … so far unable to reach an agreement,” the first BMC official said.
As of Oct. 14, BMC did not reply to Defense News’ request for comment.