ST Xiali may survive its crisis with the help of FAW

Gasgoo.com (Shanghai Dec 8) ST Xiali, who suffered a loss up to 853 million yuan in the first three quarters this year and even faces delisting crisis, finally sees the hope of profit performance at the end of the year.

Recently, ST Xiali has announced that it intends to sell four assets including internal combustion engine manufacturing branch to China FAW Group, its controlling shareholder, for the adjustment of industrial structure, which values more than 2.8 billion yuan. It is worth noting that the added value in evaluation of this asset transfer amounts to 1.021 billion yuan, which will increase the annual profit and loss of ST Xiali in 2015. In this way, Xiali may survive its crisis.

Based on the development strategy, FAW intends to integrate its subordinate powertrain resources in order to promote its domestic development by realizing the scale effect of powertrain resources and collective efficiency of technology. Thus, ST Xiali plans to transfer its internal combustion engine manufacturing branch and transmission branch to FAW for 2.112 billion yuan. Meanwhile, ST Xiali will also sell its 100% stake of Tianjin Automobile Research co., ltd. and the whole assets of product development center of the company at the price of 721 million yuan.

ST Xiali regards this transfer of assets as product upgrading and structural adjustment. The selling of main fixed assets and intangible assets of the internal combustion engine manufacturing branch and transmission branch may help Xiali mainly invest resources and funds on developing complete cars so that it can reverse its passive situation and achieve sustainable and stable development.

In addition, given that it will take some time for FAW to finish the integration of powertrain, ST Xiali has decided to sign a two-years lease contract of assets mentioned above and will pay FAW about 568 million yuan in order to ensure production and make full use of assets.

The aid from FAW helps increase the hope that ST Xiali can survive its crisis. Some insiders think that this may be the first step FAW takes to integrate business. Later FAW may further integrate business of complete cars with ST Xiali.