(first posted 4/7/2017) The fall of the Byzantine Empire, the 1929 Wall Street Crash and the implosion of the USSR have nothing on the collapse of Borgward. OK, perhaps they do, but the collapse of one of West Germany’s largest automakers is still a pretty interesting case study in how a personal industrial fiefdom can be turned to dust in record time. A fatal cocktail of Deadly Sins (much like General Motors) was the cause, though some of the facets of this story are still shrouded in mystery. This episode will be a tad longer than average, but then we are talking about the demise of four marques (Borgward, Goliath, Hansa and Lloyd) that composed the Borgward group.
Dr (Ing.) Carl Friedrich Wilhelm Borgward (1890-1963) came from a lower-middle class family in northern Germany. He got his engineering diploma in 1913. After the First World War, he joined an automobile parts supplier, Bremer Riefenindustrie. He soon took the place over, renaming it Bremer Kühlerfabrik Borgward; within five years, the company was producing three-wheel trucks, the Blitzkarren, soon followed by the Goliath vehicles, which sold extremely well.
In 1931, Borgward took over Hansa-Lloyd, another Bremen-based automaker. The Borgward Group developed into a major player in Germany, marketing an ever-widening range of cars under the Goliath, Hansa and Borgward names. Goliath made rear-engined three-wheelers and small trucks while Hansa focused on mid-market cars, the 4-cyl. 1100 (top left) and the 6-cyl. 1700 (top right) and 2000. A rather discreet Hansa 3500 Privat luxury car (bottom right) was also offered. The name “Borgward” only started to grace the grille of the Hansa 2000 / 2300 in 1939 (bottom left). The group’s range-topping cars started using a rhombus-shaped logo, notwithstanding the fact that Renaults had been using a similar one for decades.
The Hansa-Goliath plant was heavily bombed in October 1944, but at least the remaining machine-tools were not taken away by the Allies in 1945. Carl Borgward did a stint in an American jail, but his company continued producing much-needed trucks. To maximize his raw materials quota, Borgward decided to split his company three-ways in 1948: Borgward-Hansa, Goliath and a resuscitated Lloyd division were created, each with its own facilities, engineering staff and models. This would later have grave consequences, but it made a lot of sense at the time. The Hansa 1500 was launched at the Geneva Motor Show in early 1949. It was widely admired for its modern, three-box shape and integrated fenders, its all-independent suspension and spirited engine.
The Borgward Hansa 1500 was hailed as Germany’s first all-new post-war car (if one considers the Porsche 356 to be a souped-up VW made in Austria). Carl Borgward, as was his custom, had micro-managed the whole process from beginning to end, and he had done it very effectively. The car was a relative hit, with its sturdy and dependable mechanicals and wide variety of body styles: 2- and 4-door saloon, wagon, sports coupé and Hebmüller convertible.
A Diesel version was available from 1952, along with a larger 1.8 litre gasoline engine, changing the model’s name to Hansa 1800. Over 33,000 Hansa 1500/1800 were built in five years – a respectable number, but not a smash hit: most Germans couldn’t afford this type of car yet in the early ‘50s, and not every foreign customer was keen on one either, so soon after the war. But the 4-cyl. Hansa was only one prong out of the four that Carl Borgward had envisioned to re-build his empire.
In late 1949, the Goliath GP700 saloon and wagon went into production. It was aimed pretty squarely at DKW, with which it shared a small (688cc) two-stroke engine and FWD. The Goliath was particularly noteworthy in being an early adopter of the Bosch fuel injection system in 1952. A special GP700 coupé was also proposed, with a striking Rometsch body (only 25 units made).
In 1950, the new Lloyd LP300 was introduced, the infamous “Leukoplastbomber” (full history here). Its tiny 300cc two-stroke twin sat transversely in a wooden chassis, clothed in a bizarre lightweight faux-leather body. Both the Goliath and Lloyd, though FWD, featured a rear swing axle. Both models were successful, even though two-stroke engines were losing popularity.
The Lloyd was slow, crude and unsafe, but it was priced well below the VW Beetle and looked more like a car than some other “Rollermobilen” (bubble cars) that were coming out by the mid-‘50s: BMW, NSU-Fiat, Glas, Messerschmitt, Fuldamobil, Heinkel, Zündapp, Kleinschnittger, Gutbrod, Maico… Under attack from all sides, Lloyd carried on regardless, eventually gaining a 400cc engine and a steel body. A new 600cc 4-stroke twin arrived in 1955; the Lloyd 600 remained as the Borgward group’s entry-level car until the bitter end. Perhaps 3000 cars were built and sold in Australia circa 1958-60 as the Lloyd-Hartnett.
A more upmarket version of the Lloyd 600, the Alexander, was created in 1956. It featured added brightwork and a 4-speed gearbox. The Alexander TS had a more powerful 25 PS twin, but at over DM4200, it was competing with serious rivals, such as the VW Beetle or the new NSU Prinz.
As Lloyds became slightly bigger, Goliath gradually moved towards the 1-litre segment, having to deal with Volkswagen’s ever-cheaper Beetle, as well as the DKW 3=6, the NSU-Fiat 1100 or even the Ford Taunus 12M. To meet these challengers head-on, the 1957 Goliath GP1100 featured a brand-new four-stroke water-cooled flat-4.
However, it was felt in Bremen that the Goliath marque, which had a 30-year history, was assimilated with two-stroke three-wheelers in the public’s eye. This could hinder the new car’s success, so it was renamed Hansa 1100 in 1958 and the Goliath marque only remained on light trucks.
The clear-cut success story of the Borgward group in the ‘50s was the Isabella. It reigned supreme in the 1.5 litre segment for years, thanks to its solid engine, pleasant design and superb build quality. The Isabella, essentially a modernized version of the 1949 Hansa 1500 / 1800, proudly displayed the name “Borgward” on its bonnet and is the car most associated with that marque – though it did keep Hansa badging until about 1957, when that name was reassigned to the 1100 range.
The Isabella’s monocoque construction used rubber-mounted rear and front subframes, endowing it a high level of comfort and rigidity. The engine provided a respectable 60 PS, though the sporty TS (Touring Special) version was later introduced with a 75 PS motor. The car’s 4-speed gearbox was also fully synchronized, which was still a relative novelty at the time.
Launched as a two-door saloon and wagon in late 1954, the Isabella was more sophisticated than the cheaper Ford Taunus and Opel Olympia, yet much better value than a Mercedes-Benz 180 – it was, in many ways, the BMW of the late ‘50s. Borgward’s rivals and the automotive press were puzzled by the Isabella’s incredibly low price. The answer, they thought, was likely hidden in cost-cutting somewhere within the car’s structure or production methods – no one knew for sure. The real answer was probably that Carl Borgward, as was his way, dictated the price without worrying too much about the profit margin.
Coachbuilder Karl Deutsch also provided small series of Isabella convertibles for those who could afford them. Once its initial teething troubles were sorted out, the car’s export sales were beyond any of the Borgward group’s previous efforts: the Isabella conquered new markets in Europe, the Americas and Asia with incredible ease.
A stylish TS coupé joined the range in 1957, allegedly so that Mrs Borgward could be dissuaded from buying a VW Karmann-Ghia. The coupé shared absolutely no panels with the saloon – even the platform was different, making this a new Isabella in more ways than one. It also drove costs up significantly, something Carl Borgward did not seem to be losing any sleep over.
The Isabella coupé could be ordered with extra fins in 1958-59, as well as a 2-seater convertible from coachbuilders Karl Deutsch or Autenrieth. These were expensive cars, but they had virtually no competition within Germany: Mercedes coupés were far more expensive (and arguably less glamorous) and neither Ford nor Opel had anything on offer that could approach the Borgward coupé.
One segment that eluded the Borgward group was the luxury car market. The Borgward Hansa 2400 was launched in 1951, powered by a 2337cc straight-6 delivering 82 bhp, but was marred by a Hudson-like fastback shape that was already passé by the time it hit the dealerships a year later. Another influence may have been Czechoslovak, as Borgward’s special projects engineer since 1949 was Erich Übelacker, who worked at Tatra throughout the ’30s…
The 2400 was the first German car to propose a home-grown fully automatic transmission, the 2-speed Hansamatic. This box was underdeveloped though, and added to the list of issues that plagued the 2400, such as undersized brakes and unreliable power windows. Mercedes-Benz and Opel had the German big-car market all sown up, and BMWs were more prestigious. In 1953, Borgward introduced a longer notchback companion model, the Pullman, but the 2400 just never caught on.
A restyled 2400 Pullman was launched in 1955 (the fastback was dropped); Borgward sold a handful per month until 1958, by which time its engine had been completely redesigned, essentially becoming a 6-cyl. version of the Isabella’s 4-cyl. Displacement shrank to 2.2 litres, but output increased to 100 hp. With fewer than 1400 units made in six years despite a competitive price, the big Borgward was perhaps the company’s biggest flop, but the other car lines were successful enough to keep this fact well to the back of Carl Borgward’s mind.
The late ‘50s were proving to be the crunch time for Borgward. Out of the four main car lines that made up the group’s output, only the Isabella and the Hansa 1100 were fairly immune to change due to their outstanding success. Two new cars were in development: a new Lloyd and a new luxury saloon. The Lloyd Arabella came out in 1959. It featured a new platform and body. Strangely, the car had been planned with the Alexander’s parallel twin in mind, but nobody made a working prototype until the new car’s body and chassis had been finalized. The old 600cc twin would not fit in the new car, so completely new 897cc flat-4 (and a new gearbox) was hastily conceived as a replacement instead. The Lloyd flat-4 had no relation to the Goliath/Hansa 1100’s flat-4, which is symptomatic of the way Borgward ran his company.
The Arabella’s 23-month development time had been way too short and chaotic, so the car came out with quite a few faults and teething troubles: rain in the cabin (earning it the nickname “Aquabella”), weak gearboxes and shoddy workmanship were rife in the early models. Word spread very quickly and Borgward had to issue a costly recall procedure to address most of the issues. The damage to the car’s reputation was irreparable. Priced just below DM5000 at its launch, it made for very slim profit margins. In 1960, Borgward had no option but to push the price up by about DM250, mitigating this by introducing a “plain Jane” Arabella at a lower price, as well as a more powerful (and expensive) Borgward-branded deluxe version. A comparative table is worth a thousand words, so let’s have a look at one.
The Borgward cars may have been faster, but they were too brittle and expensive within their segment. The Arabella Deluxe was only about DM100 cheaper than a much bigger and more capable Opel Rekord 1200. All told, only about 47,000 Arabellas were built – a mediocre score in this segment: DKW shifted around 240,000 Juniors in the same timeframe.
Another missed opportunity was the Lloyd Frua coupé, which Pietro Frua had designed in 1958 on the 2-cyl. Alexander chassis. Only 50 cars were made, as Carl Borgward wanted the car to be adapted to the more powerful 4-cyl. Lloyd Arabella platform. A couple of slightly restyled prototypes were made in 1960 as per this request, but the company collapsed before production could go ahead.
It wouldn’t have been so bad if Borgward hadn’t launched another new car alongside the Arabella. And this new car, the P100, took aim at none other than the Mercedes-Benz 220 (W110). Carl Borgward spared no expense in developing his range-topping saloon. Brand new body, competent engine, but especially the optional “Airswing” air suspension, well before Mercedes-Benz got theirs ready – the P100 was a potent combination of the best of Borgward. The car’s development costs were substantial: DM30m were spent to get the P100 into Borgward showrooms by 1960.
Carl Borgward, as was his custom, was the sole chief designer, engineer and CFO of the whole affair. Perhaps launching two cars in parallel while tending to the daily business of running a 20,000-strong workforce and several factories was a bit much for a man in his late ‘60s who refused to delegate?
Not unlike the Arabella, the P100 also displayed a few niggles that did not do it any favours in a highly competitive segment of the market. The sensational air suspension – as GM and Ford also found out around the same time – was prone to leaks and very tricky to manufacture, operate and service properly. However, the Airswing was optional, so at least Borgward hedged their bets, and the motoring press were rather impressed by the new Hanseatic flagship, with its up-to-date styling and comfortable seats.
Full-scale production of the “Große Borgward’s” only got going in the summer of 1960; about 2500 were sold until mid-1962. Competitors were nonplussed: even the expensive (and outdated) BMW “Baroque Angel” did a bit better; the Mercedes-Benz W110 and the Opel P2 Kapitän were in a different league altogether, well into six figures over the same timeframe.
With an ailing Lloyd division and massive debt, the Borgward group entered the ‘60s in a precarious position. Still, it seemed in better health than BMW. However, Borgward fell victim to a pernicious attack from an unidentified party that brought the entire structure down like a house of cards. In December 1960, Der Spiegel published a very detailed and unnerving 14-page dossier relating the troubles happening at Borgward: dangerous amounts of debt, recalls, a lackluster 1959-60 year in terms of exports, Carl Borgward’s dictatorial approach to management – the article laid bare all of Borgward’s problems and concluded that the group’s future was in jeopardy, as it was probably insolvent. More articles were published in January and February 1961, as the panic snowballed.
The source(s) of the Spiegel hit job was never revealed. It didn’t matter a great deal, as most of the article was pretty much true – except the insolvent bit, the one that hurt confidence the most. Investors and creditors naturally started to show deep concern. Carl Borgward’s assurances that the temporary downturn and high debt were not a cause for concern had no effect: he was now portrayed as being part of the problem, not the solution. He was now 70 and many wondered who could succeed him at the helm, given his pivotal role in all aspects pertaining to the firm. Sales figures for 1960 were worse than 1959: the Arabella wasn’t selling, the Hansa 1100 was on its way out and the P100, which was only getting started, did not set the luxury segment ablaze. Only the Isabella remained strong (except in the US), but it was now six years old – how much longer would it last?
The whispering campaign amplified and Borgward’s enemies took action, especially the Bavarians. The Quandt family, which had just taken control of BMW, used their considerable influence to ensure that the banks that had so far propped up Borgward would now close their line of credit. By 1960, BMW also actively started to poach Borgward’s engineering staff, which has led some automotive historians to dub BMW’s revolutionary 1962 Neue Klasse as the Bavarian Borgward, though its development was started years earlier. The State of Bremen and the Federal authorities started to take an interest in Borgward, and the more they investigated, the more they were convinced that the company was in a death spiral.
Carl Borgward was in over his head. The political and legal machinations he was subjected to were too strong even for him. In February 1961, he stepped down as president of the Borgward group. The courts appointed a liquidator to manage the winding down of the Bremen automaker’s operations – or its sale to a competitor. BMC apparently showed interest, but no decision was taken. Production of the Lloyd Alexander and the Hansa 1100 were halted immediately; the myriad of truck and engine lines made under the Borgward, Lloyd and Goliath marques were mothballed, though there were enough stocks to last through to 1962.
The last projects Borgward were working on was the Hansa 1300, which would have gone into production circa 1962. Its crisp styling, courtesy of Pietro Frua, would probably have been a terrific selling point. It did not go to waste: Frua soon partnered with Glas, who were also sensing that the Isabella’s demise left a large gap in the middle of the market, and the Hansa 1300’s pleasant body ended up being the 1964 Glas 1500. A 4-cyl. version of the P100 (the P90) would have been ready for about 1963 and the Isabella’s successor was also on the drawing board when Borgward collapsed, but that project was still at the paper stage.
The company was unravelling, yet car production continued: in 1962, the Arabella and the Isabella were still being put together (as well as a few P100s) on a redoubt assembly line in Bremen. A cooperative had been set up by Borgward staff, dealers and enthusiasts to continue making the cars, but this was to no avail. By the summer of 1963, around the same time that Carl F. W. Borgward passed away, the last cars bearing his name left the factory. The machine-tools were bought by various competitors (Barreiros ended up with most of the truck-related ones) and the real estate was taken over by Henschel. The Bremen factory, now owned by Daimler AG, remains one of the most important car plants in Germany. Oh, and all creditors were paid in full. Borgward had never been insolvent – Der Spiegel recognized and publicized this fact a few years later.
It seems at least two places kept the Borgward name alive despite the Bremen factory’s closure. The Isabella was manufactured in CKD in many places around the world, including Argentina, Ireland, New Zealand, South Africa, etc. One Borgward factory in Surabaya, Indonesia, churned out RHD Isabellas for the Southeast Asian and Australian markets. The factory had gradually increased the amount of locally-sourced parts to over 80%, even 95% for the engines. With no orders to shut down production, the independently-financed Surabaya factory continued to churn out Isabella saloons for the Indonesian market well into the mid-‘60s, though it was impossible to export them any longer. The factory continued to manufacture Borgward engine blocks and parts for at least another decade, as demand for these was still strong and it was the only supplier left.
In Germany too, the Isabella kept trying to make a come-back. In 1965-67, former Borgward dealer Walter Schätzle got his hands on the remaining stock of Isabella parts left over in Germany and built about 140 Isabellas, but was prevented by court order from making any more, as he didn’t hold the Borgward marque’s property rights.
The last ”true” Borgward ever made, though, was not built in Indonesia or Germany, but Mexico. In late 1961, as production stopped in Bremen, Mexican entrepreneur Ernesto Santos Galindo dispatched a delegation to Germany to rate the group’s assets. The delegation came back empty-handed, but Galindo got a small group of investors together to buy out the Isabella and P100 assembly lines and ship everything to Mexico.
A new company, FANASA (Fábrica Nacional de Automóviles S.A.), was created and a factory was built near Monterrey to manufacture Borgwards for the Mexican market. The project stalled and production was pushed back several times – Galindo got cold feet and sold the company and the factory to his Vice-President, Gregorio Ramírez, who managed to get the P100 production line going in 1967. The car was virtually unchanged, save for the low-spec version’s de-finned tail and non-panoramic rear window.
The FANASA Borgward 230 was a dismal failure: the car cost FANASA MXP100,000 per unit to make, but it was sold to dealers at MXP45,000; customers usually paid MXP55,000 for the car. The market was very small for this type of car, so production never took off and economies of scale never occurred. After two years of red ink, FANASA was repossessed by its main creditor, the State-owned SOMEX bank, which gamely continued production until the end of 1970. It is worth pointing out that FANASA managed to build and sell about the same amount of its 230 model as Borgward did with the P100.
Borgward’s Mexican saga wasn’t over yet. Details are hazy, but it seems someone got a hold of a stock of FANASA-made 2.2 litre sixes and had the bright idea of putting them in VAM American (AMC Concord) bodies. The “Borgward Isabella 23” seems to have only been made (if at all) in 1979 – though solid info and photographic evidence on this bizarre bitza are elusive.
The Borgward marque was now dead, or would it do another encore, Lazarus-style?
In 2015, one of Carl Borgward’s grandchildren, Christian Borgward, announced that he was teaming up with Chinese truck-maker Beiqi Foton to market a new electric SUV under the Borgward brand. The Borgward BX7 is currently in production in China, but a new assembly line in Bremen is apparently being set up. Personally, I’ll believe it when I see one on the street – stranger things have happened, but I can’t think of one at the moment (Bugatti, perhaps?).
It is difficult to single out one Deadly Sin in particular to explain the collapse of Borgward. The rushed development of the Lloyd Arabella, as well as the underperformance and massive development cost of the P100 are two automotive Deadly Sins, for sure. But the structure of the business, with its siloed brands preventing economies of scale, as well as Carl Borgward’s overbearing micro-management, abrasive personality and unwillingness to face certain realities (or accept his limitations) were perhaps the group’s weakest point. Confusing marketing, with the group’s four marques being endlessly jumbled around in a puzzling ballet of logos and nameplates throughout the group’s life, probably did not help matters and can be compared to the worst badge-engineering excesses of BMC, Chrysler Europe or GM.
Once Borgward’s rivals saw the old man was losing his touch, they went for the jugular – and it was nothing short of a coordinated assassination. Carl Borgward died of a myocardial infarction (a broken heart?) in July 1963, his company scattered to the four winds and his reputation as an automotive genius in tatters. Those who profited from the deed included, first and foremost, BMW and, to a lesser extent, VW, Daimler-Benz and Glas.
And tomorrow, we will look into that last automaker’s spectacular rise and downfall in the final episode of this edition of the German Deadly Sins.