(Yicai Global) Nov. 30 -- Shares in Chinese car manufacturer Beiqi Foton Motor advanced today after a Chinese court ruled its subsidiary Beijing Borgward Automobile to be insolvent due to its inability to pay its debts.

Foton’s stock price [SHA:600166] was trading up 3.8 percent at CNY2.72 (USD0.38) apiece as of 1 p.m. China time today.

The bankruptcy will not affect Foton’s primary businesses nor have a big impact on operations, the Beijing-based company said yesterday.

Once Germany’s third-largest carmaker, Borgward Automobile went bankrupt in 1961 and sold its fixed assets to Mercedes and BMW. It was then bought in 2014 by Foton, a unit of Chinese state-backed vehicle manufacturer BAIC Group, for EUR5 million (USD5.2 million). Beijing Borgward was set up in 2016.

But Beijing Borgward has suffered heavy losses since it was fromed and, despite leveraging its assets to pay debts, it still ran out of money and has had to stop production, Foton said on April 8, the day that Beijing Borgward filed for liquidation at the First Intermediate People’s Court of Beijing.

The crisis has affected Foton’s performance. Last year, it racked up CNY5.3 billion (USD742.2 million) in impairment losses for Beijing Borgward, which is a one-time reduction in the fair value of an asset. This dragged the company into a loss of CNY5.1 billion (USD714.4 million) that year, compared with profit of CNY155 million (USD21.7 million) in 2020.

However, Foton is turning a corner. In the first three quarters, it posted net profit of CNY241 million (USD33.7 million), which was still a drop of 17.7 percent from a year ago, but revenue soared 20.6 percent to CNY35.5 billion (USD4.9 billion), according to its latest financial report released on Oct. 28.

Editor: Kim Taylor