Essay : Borgward and BMC

Robert Leitch discusses a deal that could have happened between Borgward and BMC that might have been the making of both…

And how fascinating would that have been?

The new Hanseatic League

FOLLOWING an enjoyable conversation with some members of the Borgward Drivers Club at the NEC in November, I received a copy of a most interesting article from the Observer in 1961, providing further evidence that BMC were contemplating a bid for stricken Bremen manufacturer. Far from being a tenuous historical what if, the story seems more relevant now than at any time in the 48 years which followed its publication.

The Observer, June 25 1961

The wooing of Borgward

Bremen June 24

Honorary Doctor of Engineering Sciences and Honorary Mexican Consul Carl F. W. Borgward is not a business man. He is a creator of automobiles. It might have been better for him, and for his adopted city of Bremen, if he had been more interested in business, and had created fewer automobiles.

As it is, Borgward – he is 5ft 5in and low-slung – occupies the role of the traditional craftsman dwarf of German fairy-tale. He has so many mechanical children that he doesn`t know what to do: and the suitors, wicked or otherwise, from overseas, are thronging round his beautiful mechanical daughters, Isabella and Arabella. Only – for this is a modern fable – nobody knows who is going to live happily ever afterwards, let alone with whom. Borgward is a self-made man, one of the thirteen children of a coal merchant in Altona, near Hamburg. At sixteen he broke his apprenticeship to a locksmith and went to study engineering at the Technical High School. By the end of the First World War, before he was thirty, he was a partner in a tyre factory in Bremen; He switched the firm over to making radiators, and made his first hit with a three-wheeler Blitzcar.

Carl Borgward
Carl Borgward

Borgward (above) has made everything in his time; He made cars under Weimar, tanks under Hitler, prams when that was all Germans could afford. By 1948, having rebuilt his wrecked works, he was the sole boss of the three Bremen car firms—Borgward, Goliath and Hansa. He brought out the first post-war German car. In the economic explosion after Germany’s currency reform, Borgward’s automotive creativity ran riot.

The four bigger German firms – Volkswagen, Daimler-Benz, Opel, and Ford of Cologne were all modern managerial units, and they all stuck to mass production of a few tried lines. Not so Borgward.

For short legs

As he said himself: ‘That’s what’s good in my case. If I get an idea one day, the next day I can say, “German workers, get started.” And no one can babble a word against me.’ In 12 years he told them to get started on thirty-four types-big cars, baby cars, sports cars, jeeps, trucks, vans, mini-buses. and even helicopters. He made a hit with a tiny car for the, German workers. And by 1959, his peak year, he was offering fourteen different types of car alone. For a long, happy time, nobody did babble a word against him. Borgward himself was the designer, and he was the stylist: he started the cars as models with a bread-knife, and he finished them with last-minute adjustments to the chrome. He even insisted on designing his cars, like the successful Isabella, to fit people as short in the legs as himself. (‘I don’t know what they want. I can see out fine, and I’m not big.’) Then, in 1960, the boom broke. Borgward was specially vulnerable. He was exporting nearly two-thirds of his cars.

The American market collapsed. There was severe competition at home.” And to crown all, there were nasty teething troubles with the new Arabella (incidentally, the one car not personally designed by the boss).

By last winter it was clear that there was a crisis. Thousands of Arabellas piled up unsold; they were too dear compared with the VWs. Two thousand employees were laid off. Borgward owed something like £20 million – half to suppliers, and half to a consortium of Bremen banks, led by the State Bank of the City State of Bremen. The city took a hand. It had to. Bremen, like its sister Hansa city Hamburg, is a little State on its own. Borgward not only owed it big money; he was also the biggest employer (23 per cent. of the industrial labour force) and the biggest taxpayer.

Like Hamburg, Bremen has a Social Democratic Government. Lt was theoretically tempting for Socialists like the Burgomaster, Wilhelm Kaisen, and his Senators, as Ministers are still called in the two cities to seize the opportunity to extend public control. It may seem less tempting now. The three firms lost £2 million in the first quarter of this year. And the Senate’s plan to put them right could take years to bear fruit.

The plan, announced in February, was this: the Borgward business ‘was to be handed over, for nothing, to the State of Bremen. The State was to set up a special company with a capital of 50 million marks to lend to it. And Dr. Borgward’s bright young lawyer. Dr. Lüthke, managed to get for him an option to buy his own firm back, liabilities and all, for 62.5 million marks any time before June 30. Finally the Senate called in a Munich company doctor, Dr. Johannes Semler, to take over the management and put things straight. He has made a series of pronouncements, some optimistic, others calling for at least toil, tears, sweat and investment capital, before Borgward could be put right. He plans to cut some models, concentrate production, sack workers.

Strong rumours

Suddenly, this month, the picture changed. Three men from the British Motor Corporation came to Bremen and saw the plant and the balance sheets.

Suddenly everyone—Semler, Borgward, the Senate – seemed to think that it would be, a good thing if BMC were the happy groom.

Not that this was the first proposal Borgward had. Way back, Chrysler are said to have offered 200 million marks. Since then, there have been rumours, more or less authenticated, mentioning Fiat, Ford, Volkswagen, MAN (the big diesel firm in Nuremburg), Oerlikon from Switzerland, Volvo from Sweden. And there is Hermann Krages, a timber merchant who built up a great fortune, put by some as 500 million marks, by buying industrial shares when prices were low after the war.

It seems certain that one of these suitors will pick up Borgward’s option, which may be extended. BMC seem hot favourites; the Borgward complex has little to offer a German manufacturer except its pool of labour, and the Senate’s whole concern is to keep the labour here. But to a foreign firm the dealers, the assembly facilities, and, above all, the formidable local goodwill of Dr, Borgward, would be worth a great deal more than the option price, if the firm could be made profitable. Whatever happens Dr. Borgward, at seventy, has no personal ambition to buy the works back and run it himself. He has had enough of what he contemptuously calls boring finance committees: and finance committees there must be, whoever takes over.

I read the persuasive conclusion, but was not wholly convinced. BMC’s multinational credentials at the time were impressive, but apart from their operations in former British colonies, their activities were very much by invitation, rather than speculative.

Then I recalled the source. Then as now, Sunday newspapers were riddled with speculation, whimsy, and stories which added two and two to make five. The substance, the ‘three men from BMC’, I don’t doubt, but the idea of a foreign company being ‘hot favourites” to save Borgward, or indeed that there was a political will, even locally, to save the company, is called into question by the events which followed. How many other manufacturers sent deputations to pick over the bones of the moribund company? Just about everybody, I’d imagine. The events of April 2005 are called to mind.

As with the collapse of MG Rover, the circumstances which led to the sudden annihilation of Borgward have been the subject of discussion and investigation even to this day, although probably at far less cost to the Federal Republic’s taxpayers. The uncomfortable conclusion is that there were forces at large determining the manner in which the German car industry should be consolidated. BMW could have died in 1957, yet instead Borgward were sacrificed to ensure their recovery.

A decade after Borgward stumbled and fell, Volkswagen looked doomed, except that national and local government made sure it didn’t happen. A few lucky breaks underpinned their recovery, and now they seem set to stand astride the world.

The disappearance of Volkswagen, or a foreign take-over, leaving Germany with no indigenously owned volume car maker was simply unpalatable, as may have been foreign ownership of Borgward, at the time Germany’s second largest carmaker, at least in terms of numbers produced.

In the 1960s young pretenders Glas were swallowed by BMW, Auto Union changed hands once again, and NSU embarked on what was possibly the most heroic act of self-immolation the car industry has ever witnessed.

The merger of van makers Henschel and Hanomag in 1969 may seem comparatively insignificant, despite the matter of the company’s ownership of the former Borgward plant at Bremen-Sebaldsbrück, but British interest played a hand yet again. Hardly had Hanomag and Henschel merged before the parent company, Rheinstahl AG, suffered financial difficulties and entered negotiations with Magirus Deutz for sale of their vehicle making subsidiary. When these failed to deliver, British Leyland expressed a serious interest. The negotiations with Leyland precipitated Daimler-Benz entering the bidding war, perceiving a serious and unwelcome ambition by the newly formed British company to gain a foothold in the German commercial vehicle market.

Knowing what we do of British Leyland’s circumstances, the bid for Hanomag–Henschel is far more remarkable than ‘the wooing of Borgward”. Conventional wisdom suggests that the last things the British group needed were another two nameplates and several more factories. Their audacity in attempting to conquer a small part of the land of MAN, Magirus Deutz, and mighty Mercedes Benz is a reminder of the world-class standing which Leyland the commercial vehicle maker held, underpinned by a sustained and aggressive campaign of takeovers in the post-war era.

If Daimler-Benz had not taken the threat of the over-ambitious lorry and maker from Lancashire so seriously, what would Sebaldsbrück’s future have been as part of British Leyland in the decade which followed? I wish I could be more positive, but the lessons of Seneffe, Lambrate, Pamplona, Zetland, and Blackheath suggest that Daimler-Benz’s intervention was fortuitous.

By the early 1980s car production had returned to Sebaldsbrück, starting with the W123 T class estate, to be followed by the outstandingly successful W201 190E, which assured the Bremen plant’s future as a key component in Daimler Benz’s production infrastructure, assembling far more cars than in the days when Carl Borgward ruled.

Five years have passed since we witnessed the guttering candle of the MG Rover dream. The last rites have now been read to Saab. Are there any lessons to be learned from the fall of Borgward? Possibly not. The huge, but often marginally profitable car industry falls hostage to fortune with unnerving regularity, whether through the capriciousness of its customers or the turning of economic tides. Now, as in 1961 and 2005, politicians sit as judge and jury on the fate of the body corporate.

Perhaps there is just one clear, salutary, message in the 48 year old Observer article:

‘In twelve years he told them to get started on thirty-four types-big cars, baby cars, sports cars, jeeps, trucks, vans, mini-buses, and even helicopters. He made a hit with a tiny car for the, German workers. And by 1959, his peak year, he was offering fourteen different types of car alone.’

Look upon the current offerings of BMW, Daimler, and Audi, and ask whether they are not swaggering unthinkingly into the same trap, with absurdly diverse ranges, including many expensively-developed products which seem to answer questions which nobody asked – X3, X6, B Class, R Class, I’m looking at all of you… The bullies and braggarts of the world’s roads take ever more diverse shapes, and we are left to wonder why. If it all goes wrong, Hell mend them. The warning was there, if they had only heeded it.

Robert Leitch

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