(Yicai Global) Dec. 22 -- Tianjin Motor Dies, a leading Chinese maker of auto chassis molds, said its European unit had filed for bankruptcy.

Tianjin Motor Dies Europe, also known as TQM-EU, has been in deficit since 2018 and has not had sufficient liquidity amid the coronavirus pandemic, its parent company said after the market closed today. An insolvency application was filed with a German court yesterday.

The timely start of bankruptcy procedures will help TQM-EU halt its losses and protect the rights and interests of the company and shareholders, the statement said. Whether the unit can begin formal proceedings will depend on the court’s decision.

Shares of Tianjin Motor Dies [SHE: 002510] closed almost 6.9 percent lower today at CNY5.16 (79 US cents).

Formed in 2013, the unit has registered capital of EUR1 million (USD1.2 million) and 152 employees. It specializes in marketing, developing, designing, making and processing automobile dies as well as after-sales and technical consulting services.

TQM-EU had a CNY33 million (USD5 million) loss in the first nine months of this year on revenue of CNY63.5 million. Last year, it lost CNY26.6 million on CNY130 million in revenue. That revenue accounted for just over 6 percent of its parent’s total income last year, while the loss was minus 30 percent of the parent’s net profit.

TQM-EU’s business has declined in recent years due to falling demand in Europe’s motor dies market. Capacity has transferred to China, South Korea and other low-cost Asian countries, with Germany’s labor costs staying high, the statement said.

Carmakers and auto parts manufacturers have stopped production amid the coronavirus pandemic, so TQM-EU’s orders plunged. It has had difficulties making payments as its loss has widened.

European business has increased as a share of Tianjin Motor Dies’ total in recent years, and the company will make greater efforts to develop the European market after TQM-EU goes bankrupt, it said. The firm will continue to serve European clients by cooperating with technical and motor die firms in their locations. It is likely to form project management and after-sales service agencies based on an asset-light model when the time is right, the company added.

Editor: Peter Thomas