Borgward, a storied German carmaker, tries comeback in China

Borgward, a storied German carmaker, tries comeback in China
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The German auto company with a storied history but a blemished reputation is trying to make a comeback.
No, not Volkswagen. We're talking about Borgward.
For a brief moment in the mid-1950s, the second-biggest German automaker, after Volkswagen, wasn't BMW, Mercedes or even Opel. It was a company called Borgward, which had been bootstrapped by the mercurial engineer Carl F.W. Borgward and was focused on making smooth-handling, stylish cars that middle-class Germans could afford. Read full Report as seen on CNBC


But despite enthusiastic owners, robust exports and undeniable technical advances, Borgward was gone by 1961, unable to pay creditors. The last of the Isabella models that came off the production line in Bremen, Germany, bore a sign reading "Du warst zu gut für diese Welt," (You were too good for this world) surrounded by grim-faced workers.

The company seemed destined to join a long list of noble failures in the automotive world, its swoopy Isabella coupes and stately P100 sedans fondly recalled only by graying former owners and preserved by enthusiasts in Europe and North America.

But now, after more than a decade of effort led by Christian Borgward, a grandson of Carl Borgward and the son of an auto executive, the marque is attempting a revival — not in Germany but in China. Borgward has lined up a partner, Beiqi Foton Motor Company, a truck maker that will produce its first cars in China for the domestic market there.

The venture's initial offering, the all-wheel-drive BX7 sport utility vehicle, was unveiled at the recent Frankfurt auto show. The BX7 will not necessarily break new technological ground, said Karlheinz Knöss, the vice president of the Borgward Group's supervisory board, but the company hoped it would stand out in a crowded field of competitors with a "wing line" design meant to evoke flight and "the premium interior of a higher-class vehicle." That interior includes an unusually large 12-inch dashboard touch screen.
Hannelore Foerster | Getty Images
Executives for Borgward Group declined to give a target price, except to say that it would be "very competitive" in its segment — mentioning the Audi Q5, which starts at $56,428 in China, as a possible rival.
The company hopes to start production around the middle of next year and make two models a year after that. And rather than tiptoe into the market, the company has proclaimed a sales goal of 500,000 vehicles a year "in the medium term" — a bold target indeed when the Borgward Group's total sales over the years of its previous incarnation were just over one million.

"We will reach that, definitely," Mr. Knöss said, "and in roughly two years' time we will enter the German-European market."
Borgward has brought in a roster of European automotive industry veterans.
Mr. Knöss has worked at Saab, General Motors and Daimler as a strategist and communications director. Ulrich Walker, the chief executive, has held top positions at Mitsubishi, Smart and, most recently, at Daimler as chief executive of northeast Asia operations, which included China. Borgward's head of design, Einar Hareide, has worked for Saab and Volvo.

Borgward's partner in China, Beiqi Foton, produces 650,000 medium- and light-duty trucks a year. And though it has never produced passenger cars, Mr. Knöss said Foton, as it is known, was a logical choice.
"It was important to partner with a company in one of the target markets like China," he said. "If we would have tried to get all the permissions to produce and to sell cars there it would have taken us another 10 years."

Still, the recent history of the auto industry — with giants like Toyota, Volkswagen and General Motors shouldering aside or buying up independents, and the threat of disruptive technology coming from outsiders like Google or Apple — argues against starting a new car company.
Stephanie Brinley, a Detroit-based senior analyst at IHS, said that in large part, Borgward's success would depend on its financing. "Entering or re-entering the automotive market is incredibly difficult and requires deep pockets," she said.

Those deep pockets are Foton's. The company holds 100 percent of the Borgward Group's stock, Mr. Knöss said, though new partners and investors are being sought.
"If they've got enough backing to get the capital they need to survive for a few years, that's the bottom requirement," Ms. Brinley said. "Because you aren't going to be making money for a few years. You're going to be blowing through a lot of it in terms of plant production and marketing."

A big question will be the health of the Chinese auto market, which has felt the effects of the country's stock crash. Sales of passenger cars fell year-over-year in June, July and August, according to the China Association of Automobile Manufacturers.
Nonetheless, China remains a huge market, with some 19 million passenger cars sold in 2014. "It's important to remember that even if it's slowing down, it's still a significantly large market, and there's still potential for growth there," Ms. Brinley said.

And Borgward's German heritage might give it an edge in China, she said. "Chinese consumers prefer to have a luxury brand that has history and heritage, but it doesn't have to be heritage that was developed in China."
Certainly, Borgward has a history. Carl F.W. Borgward was born in 1890 near Hamburg, and from early years he showed a mechanical bent. By 1912 he was working as a designer at an ironworks at a time when the automobile was fast becoming an essential mode of transportation.
In 1930, after a series of shrewd business moves, Mr. Borgward acquired his own factory and set about building vehicles. By the outbreak of World War II, Mr. Borgward had a lineup that included three-wheel delivery carts, luxury sedans and heavy trucks.

During the war, Mr. Borgward, like many German industrialists, made military vehicles. After the war he was interned by the American occupational authorities. But upon his release in 1948, he quickly returned to automaking, finding an eager market among Germans hungry to return to normal life.
Borgward's first hit was the Hansa 1500, a sedan that featured new-for-the-time integrated fenders and flashing turn signals. But his pièce de résistance was the Isabella, a midmarket car introduced in 1954 that outperformed the competition with four-wheel independent suspension, strong brakes and a top speed of 85 miles per hour.

"The Isabella was a very light car, under a ton, but it was the size of a large saloon car and could seat six people," said John Wallis, the chairman of the Borgward Drivers Club in Britain. "The other thing was, the car handled. You could drive it around corners without it doing anything nasty."
Borgward added a coupe, station wagon and a convertible, and over 200,000 Isabellas were produced, with thousands sold in North America. Prices started around $1,600. Today, restored examples can sell for over $50,000.

"If you drive an Isabella today it's just like a modern car," Mr. Wallis said. "They were a real driver's car."
But while few doubted Carl Borgward's engineering brilliance and entrepreneurial spirit, the finer details of running a business sometimes eluded him.
"The main problem he had — how should I put it — he was an autocrat," Mr. Wallis said. "He ran the company as he wanted to."
When a cash-flow crisis hit in early 1961, Mr. Borgward found himself with few allies. He lost control of the company after he clashed with the Bremen state government, which had made a bailout loan to the company because it was a big employer. Fed up with Borgward, the officials stopped disbursing the money.
"He was his own worst enemy," Mr. Wallis said.
But if all goes to plan, the Borgward name will be on the road once more.
"Borgward could maybe find a place for itself in emerging markets," Ms. Brinley said, "just because there's more growth there and the buyers are younger in their automotive experience, and more willing to consider something new."
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