Yulon Motor Co (裕隆汽車) shares rallied 4 percent yesterday after the company announced that its subsidiary that distributes its own-brand Luxgen vehicles has started bankruptcy procedures in China, paving the way for its subsidiary Luxgen Motor Co (納智捷汽車) to exit the world’s biggest auto market.
Sales of Luxgen vehicles tumbled to below 3,000 units last year amid a slump in the Chinese auto market, compared with 100,000 vehicles at its peak.
Yulon has been restructuring its Chinese auto business and distribution channels over the past year as it struggles to boost Luxgen sales in China.
Photo: Amy Yang, Taipei Times
Yulon on Friday said that the Hangzhou Intermediate People’s Court has granted a request from a major creditor of Dong Feng Yulon Sales Co (東方裕隆銷售) to liquidate the assets of the distributor, which cannot pay its debts of 1.96 billion yuan (US$297.7 million).
Dong Feng Yulon Sales, which is 50 percent owned by Yulon, distributes Luxgen vehicles in China, while Dongfeng Yulon Motor Co (東風裕隆汽車), a 50-50 venture between Yulon and Chinese automaker Dongfeng Automobile Co (東風汽車), makes Luxgen vehicles.
Yulon, based in Miaoli County’s Sanyi Township (三義), has been in discussions with its Chinese partner about a restructuring of Dongfeng Yulon Motor to stem losses, Yulon told investors in August.
“The court has approved that Dong Feng Yulon Sales Co should enter an insolvency procedure, given its financial situation,” Yulon spokesman Steven Lo (羅文邑) told a media briefing at the Taiwan Stock Exchange on Friday.
“The company’s operations have been suspended since 2018. This incident will not affect Yulon’s financial reports in the first three quarters of 2020. Based on our current evaluation, it will not cause a significant financial payment, nor incur a deep debt,” he said.
Dong Feng Yulon Sales, which has paid-in capital of NT$215 million (US$7.46 million), last year fell into a dire financial situation, with liabilities surging to NT$8.39 billion, greatly exceeding its assets of NT$404 million, according to Yulon’s annual report.
Yulon shares jumped to NT$37.7 yesterday, with turnover surging to 10.62 million shares, three times the average trading volume of 3.1 million shares in the first 10 trading days of this month.
Yulon’s net profit grew 31 percent to NT$744.15 million in the quarter that ended on Sept. 30, compared with net profit of NT$567.32 million in the second quarter and a net loss of NT$1.57 billion in the third quarter of last year.
In the first three quarters of this year, Yulon made NT$1.51 billion in net profit, an improvement from a net loss of NT$2.51 billion in the corresponding period last year. This translated into earnings of NT$1.54 per share, compared with a loss of NT$3.2 per share.
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