Government Bailout of BMW Supplier Sparks Concerns of Possible Secret Takeover

A local government bailout of a Chinese supplier of automaker BMW AG has rattled investors who fear that local authorities are likely to take over the company’s core, profitable business in the wake of the default.

Shenzhen-listed Kangdexin Composite Material Group Co. Ltd. failed to repay principal and interest due Tuesday on 1 billion yuan ($148 million) in debt, according to its exchange filing. The company is based in the city of Zhangjiagang in the eastern province of Jiangsu that borders Shanghai. In recent years, it has supplied automakers such as BMW and Mercedes Benz with carbon fiber composite materials, according to its annual reports.