BenQ Mobile, the Munich-based handset company, on Thursday announced it was filing for insolvency after its Taiwanese parent pulled the plug on the lossmaking business it took over from Siemens less than a year ago.

BenQ Corp in Taipei said it had decided not to put any more money into the business because if it had it might have threatened its own survival. Shares of BenQ Corp surged more than 5 per cent to T$19.2 in Taipei by late Friday morning.

The drastic move puts 3,000 jobs in Germany at risk, prompting an angry reaction from trade unionists who blamed Siemens for disposing of both a money-losing business and responsibility for its employees.

Siemens said in a brief statement: “We are very surprised about the attitude of BenQ to no longer give financial support in Germany and to steer [the subsidiary] into insolvency. We do not understand the intentions, nor the background.” Siemens declined to comment on how the insolvency would affect its business.

BenQ said it had invested €840m ($1.07bn) in the affiliate and booked €600m in losses from it during the past year. Sheaffer Lee, BenQ president, said BenQ would have needed to invest another €500m in BenQ Mobile to turn it round by the second half of 2007.

“That was more than we could afford without putting the parent in danger,” Mr Lee said.

BenQ said it expected the German government to shoulder the cost of dealing with BenQ Mobile once an insolvency administrator had been named.

The company said it would run handset sales outside Europe, while it expected to continue co-operating with BenQ Mobile in European markets.

However, legal experts said the prospects for the German company and its employees looked bleak. “Given that this company has been kept alive by its parent, it would seem there is no alternative to liquidating the company,” said one German insolvency lawyer.

Last year, Siemens invested €50m in BenQ shares and agreed to pay the Taiwanese company €250m in cash and services to take over its lossmaking handset business. BenQ said Thursday disagreements had arisen over the terms of the €250m agreement, and it would seek arbitration over the issue.

A job guarantee for BenQ Mobile employees until the end of 2006, which BenQ made as part of an agreement with Siemens last year, would remain intact even under court receivership, said sources at BenQ Mobile.

Eric Yu, BenQ chief financial officer, said the move would “drastically reduce” losses at BenQ after the fourth quarter this year. A plan to raise $400m in additional funds for the handset affiliate was put on hold. BenQ reported total losses of T$13.5bn ($409m) for the three quarters following the takeover of the German operations.

Analysts said BenQ would have to take some additional charges.

“But it’s positive in the short term because it stops losses,” said Vincent Chen, an analyst with CLSA in Taipei. BenQ shares closed up 3.7 per cent in Taipei before the announcement.

BenQ executives said its move was likely to hurt Infineon, the chipmaker that has remained a key supplier for BenQ Mobile. AFX, the news agency, quoted Infineon saying that it would now be “more difficult” to break even in four quarters time. Infineon shares fell as much as 7.4 per cent in Frankfurt on Thursday.

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