(Yicai) Sept. 23 -- Shares of Jifeng Auto Parts rose after the Chinese car seats supplier  said the firm plans to sell its unprofitable US unit, initially pricing it at USD40 million.

Jifeng [SHA: 603997] closed up 2.9 percent at CNY11.83 (USD1.68) a share in Shanghai today, after jumping by as much as 6.5 percent in early morning trading. The stock is 12 percent lower than it was at the end of last year.

Jifeng’s German unit Grammer will sell its entire stake in Toledo Molding & Die to US auto parts supplier First Brands Group, its Ningbo-based parent company announced yesterday, citing a board decision.

Toledo Molding & Die, which makes customized plastic molded parts for carmakers, reported a net loss of CNY134 million (USD19 million) for the first eight months of this year following CNY263 million of red ink last year.

Grammer acquired Toledo Molding & Die for USD271 million in 2018, so its sale will have a major negative impact on earnings at Jifeng and its German unit this year. It could result in a financial hit of between CNY280 million and CNY380 million, possibly tipping Jifeng into a loss, as it was barely profitable in the first half.

In the six months ended June 30, Jifeng had a net profit of just CNY53.1 million when CNY342 million of other assets and credit impairment provisions are excluded.

Jifeng bought 84 percent of Grammer in 2019, thereby bringing Toledo Molding & Die under its wing. But Grammer has not contributed much to Jifeng’s finances and lost CNY35 million (USD5 million) in the first half of this year.

The poor first-half results prompted Jifeng to divest the loss-making unit, which has no direct relation to the firm’s core seating business, it said, noting that the sale can help Grammer refocus on its main business, improve its profitability in North America, and bolster operations.

Editor: Futura Costaglione