Recently, Foton Motor announced that the company received the "Report on the Court's Seizure of Borgward Assets" from Beijing Borgward Automobile Co., Ltd., and related assets of Beijing Borgward were seized by the Beijing Third Intermediate People's Court.

　　According to the announcement, the applicants for the seizure are Beijing Baowo creditors, totaling 34; the respondent is Beijing Baowo. Because Beijing Borgward was unable to repay the debts owed by the suppliers and other creditors, the relevant creditors applied for the seizure of their related assets, and the amount involved was approximately RMB 1,235,565. The details of the seized property include machinery and equipment, transportation equipment, office equipment, IT equipment, tooling and molds, other equipment, construction in progress, and inventory, with a book value of 2.2 billion yuan.

　　It is worth noting that the property rights of Beijing Borgward’s assets in this seizure do not belong to Futian, nor are they related assets that Beijing Borgward used to settle debts.

　　Foton Motor stated that the assets seized this time are all necessary for the production and operation of Beijing Borgward. The seizure will have a significant impact on Beijing Borgward and will also have an adverse effect on the recovery of the company's related claims. The company applied for the seizure of Borgward's related assets on November 11, but the court has not yet implemented it. After the Beijing Borgward assets were seized by other creditors this time, if the court approves the company's application for the seizure of the Beijing Borgward assets, the company can only wait for the seizure.

　　used to be the hope of entering the passenger car market, but now it has become an indispensable "baggage" that drags down performance. The negative impact caused by the wrong decision to acquire Borgward still plagues Foton Motor.

　　performance drag

　　In 1919, German engineer Karl Borgward founded the Borgward automobile brand. The brand was once the third largest automaker in Germany and once occupied 60% of the German auto export market in the middle of the last century. However, it declared bankruptcy in 1961 due to poor management.

　　In 2014, Foton Motor spent 5 million euros to acquire the German Borgward Automotive brand, and announced the revival of the brand at the Geneva Motor Show in 2015; in January 2016, Foton Motor invested 1.46 billion yuan to establish Beijing Borgward Automotive Co., Ltd. Co., Ltd., launched the first SUV model BX7 and entered the passenger car field.

　　As soon as Borgward was launched on the market, it launched the slogan of "Mercedes-Benz, BMW, Borgward, Audi, four German brothers", positioning itself in the high-end market. However, apart from the brand, the so-called "pure German pedigree" Borgward Automobile does not have any technical background. R&D and production are all done by Foton, which lacks passenger car experience. Therefore, its product strength is simply not enough for the high-end market. Based on its foothold, its sales are getting sluggish day by day, and its operations are in trouble.

　　Foton Motor’s financial report shows that from 2016 to 2018, Borgward’s sales were 30,000, 44,000, and 32,900, respectively, with revenues of 4.539 billion yuan, 5.76 billion yuan, and 3.06 billion yuan, and net losses were respectively 484 million yuan, 985 million yuan, 2.54 billion yuan, three years of accumulated losses amounted to 4.014 billion yuan, of which Borgward's losses in 2018 accounted for 70% of the company. Has become a major drag on Futian's operations. Foton Motor said that since its launch in 2016, Borgward Auto is still in the market development stage, with huge investment in research and development, advertising, and technological transformation, and because the sales volume has not yet formed a scale, it has caused a significant increase in the company's losses.

　　In 2018, Foton Motor formulated the "Three-Year Action Plan", which established the strategic direction of focusing on commercial vehicles and divesting non-main businesses, which means that the company has begun to abandon attempts to develop the passenger car market through Borgward. In October of the same year, in order to stop the loss in time, the company decided to publicly transfer the 67% equity of its wholly-owned subsidiary Beijing Borgward Automobile Co., Ltd. through the Beijing Equity Exchange, and introduced diversified capital investment to get rid of this "hot". "Yamata" enables the company to focus more on its core business.

　　In January 2019, Foton Motor confirmed the transfer of 67% equity of Beijing Baowo to Changsheng Xingye (Xiamen) Enterprise Management Consulting Co., Ltd. The transaction price was 3.972 billion yuan. According to the agreement, Changsheng Xingye needs to pay the equity transfer payment in two installments within one year. In addition, Changsheng Xingye also needs to settle the principal of Foton Motor's shareholder loan (approximately RMB 4.271 billion) and its interest within 3 years from the date of completion of the 67% equity transfer of Borgward Auto. To facilitate this transaction, UCAR, as the guarantor, will provide a guarantee of no more than 2.4 billion yuan for shareholder loans provided by BAIC Foton to Baowo Automobile.

　　After UCAR entered the market, it began to cooperate with Borgward Automotive to launch the "New Automotive Retail" strategy and launch the new retail platform for Borgward Automotive, claiming that "through industrial chain transformation and platform empowerment, the separation of production and sales and channel reshaping will be fully realized. , Reconstruction of automobile consumption, redefinition of new automobile retail", "build thousands of cities and tens of thousands of stores", close to the customer network.

　　In March 2019, UCAR officially issued an announcement that it intends to transfer 67% of the equity of Beijing Baowo Automobile Co., Ltd. held by Changsheng Xingye, and the equity transfer price is about 4.11 billion yuan. After the transaction is completed, UCAR will acquire a controlling stake in Borgward Auto.

　　The so-called "new car retail" gimmick cannot change the inherent disadvantages of Borgward Auto. In 2019, the brand once relied on purchase orders from China Rent-A-Car (a subsidiary of China UCAR), and its sales increased to 54,500 units. By 2020, due to the impact of the epidemic, Shenzhou Rent-a-Car, which has suffered heavy losses, will suspend the purchase of new cars. Borgward's new car sales have also fallen rapidly to 8740 in the same year.

　　In fact, since China UCAR was listed on the New OTC Market in 2016, it has only achieved short-term profits in 2018 (deducting non-recurring gains and losses, it is still a loss), but it has taken huge risks to acquire shares in Borgward, which cannot make ends meet, further intensifying The financial pressure of UCAR. In the financial statements disclosed in the 2019 quarterly and semi-annual reports, UCAR failed to incorporate Beijing Borgward into the scope of consolidation as required, and was deemed illegal by the China Securities Regulatory Commission and imposed sanctions. Even so, the company still failed to truthfully disclose the 2019 annual report and the financial status of Borgward Auto on schedule.

　　At the same time, Luckin Coffee, which is also a "Shenzhou-based" company, made the operation of UCAR "exacerbated". In March 2021, due to the failure to disclose the annual report on time, UCAR was suspended from listing on the New Third Board, and the company's equity of Chairman Lu Zhengyao was frozen. Borgward Automobile is on the brink of desperation once again.

　　The burden is hard to shake

　　Borgward, which has huge debts, has made Foton Motor still bear its serious negative impact today.

　　Shenzhou UCAR fell into a slump, resulting in Foton Motor’s failure to recover the equity transfer payments and shareholder loans on time. In January 2021, Foton Motor issued an announcement stating that as of December 31, 2020, the company still had 1.67 billion yuan in the balance of the equity transfer of Beijing Baowo that had not been received, which had a certain impact on the company's overall cash flow.

　　In order to reduce losses, in March 2021, Foton Motor's board of directors reviewed and approved the "Proposal on Recycling Some Assets and Liabilities of Borgward Engines", and reclaimed Borgward engine-related assets to offset Beijing Borgward's arrears to Foton Motor.

　　At the same time, Beijing Baowo has been unable to resume work and production for a long time, and its operating conditions have continued to deteriorate. There are risks in its production and operations and it does not have the ability to pay debts. This has forced Foton Motor to have to pay its debts.

　　In September 2021, as Beijing Borgward was unable to repay the principal and related interest of the 400 million yuan loan of Hua Xia Bank on time, Foton Motor, which has a guarantee obligation, paid 404 million yuan for Beijing Borgward. After the compensation, Foton Motor provided Beijing Baowo with a guarantee balance of 310 million yuan and an overdue guarantee amount of 310 million yuan. Whereas China UCAR (Xiamen) provided Futian with a joint liability guarantee counter-guarantee for the company’s guarantee for Beijing Baowo’s loan to Huaxia Bank; Beijing Baowo and Baowo China provided Futian with pledges of 513 patent rights under their names. For counter-guarantee, Foton Motor filed an arbitration application with the Beijing Arbitration Commission, requesting a ruling that Beijing Baowo should repay the advance payment of 404 million yuan and bear the corresponding arbitration costs; and request that the relevant counter-guarantor bear the counter-guarantee liability.

　　In November 2021, the court ruled to seal up, seize or freeze the property of Beijing Baowo’s guarantor Shenzhou Youcar worth 1.645 billion yuan. The first batch of preservations within the scope of this preservation is the waiting to freeze the Shenzhou flash loans held by Shenzhou Youcar. (Pingtan) Financial Leasing Co., Ltd. and UCAR (Fujian) Information Technology Co., Ltd. Foton Motor stated that the company will continue to follow up and take legal measures, including but not limited to, to recover Beijing Borgward’s shareholder loans and equity transfer payments.

　　The financial report for the third quarter of 2021 shows that related matters involving Beijing Baowo will have a total impact on Foton Motor’s total profit during the reporting period of approximately -289 million yuan. After deducting the influence of the aforementioned Borgward issues, the company's profit for the reporting period was approximately 18 million yuan.

　　As of the end of September 2021, the original value of the equity transfer funds and interest related to Baowo was 1.671 billion yuan, which was 1.016 billion yuan after impairment; the original value of shareholder loans and interest was 1.792 billion yuan, which was 1.366 billion yuan after impairment; The original value of the remaining funds was 1.153 billion yuan, 689 million yuan after the provision of impairment; the long-term equity investment was 588 million yuan. The balance of guarantee to Baowo is 310 million yuan, of which 180 million yuan is actually assumed to be guaranteed. The above-mentioned remaining funds are still subject to subsequent impairment risks.

　　A source revealed to the media that Foton Motor will strive to resolve Borgward's related debt issues within this year.

　　In December 2021, due to the inability to repay the debts owed by creditors, relevant assets necessary for the production and operation of Beijing Baowo have been seized. This German brand, which went bankrupt due to poor management, may go bankrupt again after a brief resurrection.