Can new funder revitalize Borgward for third time?

December 28, 2018, rumors on the Internet that UCAR together with a new over-the-counter market company completed the acquisition of a 67% stake in Borgward. The same day, in the announcement of the progress of equity transfer issued by BAIC Foton, it was pointed out that Changsheng Xingye (Xiamen) Enterprise Management Consulting Co., Ltd., a new company established less than one month ago, became the real receiver and the final transaction price was RMB 3.973 billion yuan. It has been rumored that UCAR and Borgward, which have already reached a strategic partnership, will jointly develop a new retail model for automobiles.

This acquisition has filled the "mystery" to the development and operations of Borgward. After IIA had contacted the insiders of Borgward Auto, they said that it was unable to disclose too much information to the outside world right now. However, Borgward has decided to hold a media communication meeting in mid-January. I believe that many questions will be uncovered at that time.

Sales opened higher yet progressed lower

At the International Geneva Motor Show 2015, BAIC Foton announced the return of Borgward. This near 100-year-old car brand has experienced the peak of development, and then unexpectedly went bankrupt and disappeared. Until 2014, BAIC Foton purchased 100% of Borgward AG with RMB 5 million shares and owned the Borgward brand.

With the support of BAIC Foton's funds and other resources, Borgward quickly obtained the dual qualification production license of fuel vehicles and new energy vehicles, and built a flexible intelligent vehicle factory and engine factory according to the manufacturing standards of German Industry 4.0. Meanwhile, it also sets up R&D centers in China, Germany and the United States, which boast the ability to produce intelligent vehicles in a large scale, and gradually develops to the global level.

In the face of the fast-growing SUV market in China, in 2016, Borgward took the lead in launching the first medium-sized SUV Borgward BX7, and at the same time, began a marketing work focusing on “German bloodline”, which attracted widespread attention in the market. In the first year after the launch of the Borgward BX7, it achieved a cumulative sales volume of 30,015 units, with the highest monthly sales of nearly 6,000 units. Subsequently, 120 Borgward car dealers were built in one year. It is expected that with the rapid growth of the Chinese market, Borgward will be able to enter the fast lane smoothly.

However, the good times did not last. By 2017, the development of Borgward in the market began to show fatigue. The brand marketing didn’t attract consumers any longer, and the listing of the second SUV Borgward BX5 did not achieve the expected results. Its cumulative sales volume for the year was 44,380 units. In the context of the entire “cold” car market, the cumulative sales volume of Borgward in January-November, 2018 was 30,620 units, down 22.58% year-on-year. The BX6 and the pure electric vehicle BXi7, which have just been introduced to the market, also didn’t bring a good market response.

Dismission of the founder team

The poor sale is just one part. Frequent personnel changes have also added some unstable factors in the operation of Borgward. Since June 2017, Borgward’s vice president and general manager of the marketing company, executive vice president, and two executives responsible for sales and marketing have resigned successively. At the same time, the position of global CEO is also taken over by Philip Koehn.

After the founder team members left, Borgward hired the former Dongfeng Nissan marketing star Yang Song as the chief operating officer and general manager of the marketing company of Borgward Automobile Group, and then promoted to be the president of Borgward Automobile Group. After joining Borgward, Yang started a resolute and bold reform, re-adjusted and optimized the marketing company's organizational structure, quickly formulated Borgward's marketing strategy, and determined the brand attributes of “Chinese Capital Holding German Brand” and the position of engineer brand. Let the image of Borgward in the public be more clear.

The marketing effect could not be reflected in sales and corporate revenues very quickly. Due to the pressure of funds, BAIC Foton chose to convert shares.

According to a latest financial statement, in 2017, Borgward’s assets totaled 5.039 billion yuan, total liabilities were about 3.904 billion yuan, net assets were 1.135 billion yuan. Its operating revenue was 5.096 billion yuan, and operating profit loss was about 255 million yuan. The net profit loss was approximately 275 million yuan. From January to August 2018, Borgward's operating revenue was 2.267 billion yuan, operating profit loss was 1.647 billion yuan, and net profit loss was about 1.649 billion yuan.

Last June, BAIC Foton once again increased its capital to Borgward by 4.409 billion yuan, aiming to attract a more powerful investor for Borgward to support its further development in the future. In the “Three-Year Plan” of Foton Motor, there is a measure that “Foton will increase cooperation in joint ventures and introduce strategic investors. We will promote mixed ownership reform, establish independent legal entities, and carry out capital operations.” Now it seems more to confirm BAIC Foton’s plan at the time.

Who is the receiver?

October 17, Futian Automobile issued a notice on the public transfer of 67% equity of Beijing Borgward Automobile Co., Ltd. November 6, the company officially publicly listed Borgward. Subsequently, on November 24, Borgward decided to postpone the listing for 20 days. As of the end of December 28, the final receiver appeared.

Changsheng Xingye (Xiamen) Enterprise Management Consulting Co., Ltd. eventually became the transferee, and UCAR, which has been rumored before, has only entered into a strategic partnership with Borgward. The two sides only cooperate to develop new car retail models.

In addition, UCAR has assumed a special role in the equity transfer. On November 23, Borgward updated the listing transfer notice, the transfer price will be raised to 3.973 billion yuan, and the taker will also need to repay 4.271 billion in arrears for Borgward in 3 years. In the Borgward Auto property rights transfer information disclosure, the purchaser should provide legal and valid guarantees recognized by BAIC Foton for the above loans, with a guarantee amount of up to 2.4 billion yuan.

According to TianYanCha.com, Changsheng Xingye was established on December 3, 2018, with a registered capital of RMB 2 billion yuan. Its business scope includes corporate management consulting, social and economic consulting (excluding financial business consulting), business information consultation, etc. The legal representative is Wang Baiyin. According to the information on the site, Wang has as many as 75 companies under his name, most of which are concentrated in the pharmaceutical retail sector, but have not been involved in the automotive industry.

Although Wang Tao, a spokesperson for the UCAR in China, said, "The two companies have nothing to do with it." But the facts are self-evident.

According to the announcement issued by UCAR, after the transaction is completed, it will rely on its established car sharing service system and new car retail service platform, to conduct comprehensive and in-depth strategic cooperation with the restructured Borgward in product manufacturing, vehicle procurement and fleet operation, and sales system expansion. They will also jointly develop the “new car retail” model and give full play to the resource advantages of both sides to achieve common development.

After ten years of development, UCAR has become a platform-oriented company with in-depth focus on travel and automobile industry chain. It has travelling (Shenzhou Car Rental and Shenzhou Special Car), E-commerce (Shenzhou Buying Car) and Finance (Shenzhou Flash Car Loan), three major business. In the current period of the automobile industry and the transition to suppliers of mobile travel services, the cooperation between the two sides will bring a new way of car development for Borgward. On the other hand, it also solves the most urgent need, the funding crisis, for Borgward.

In addition to this, it is also worth noting that after the joint announcement between Borgward and UCAR, Borgward also reorganized its management team.

Former Magna International Inc.Asia President Bruno Lambert will be the president of Borgward.

Who is Bruno Lambert? He has nearly 20 years of automotive industry experience and was the president of Magna Steyr Asia, where he was responsible for consulting, vehicle development and localization services for major OEM customers in seven major countries and regions including China, India and Japan. At the same time, he also participated in the vehicle development and project management of BMW, Renault, PSA and many other brands. Later, he joined the ICONIQ, a new Chinese-made car company established in 2014, where he accumulated rich experience and high strategic forward-looking in the fields of smart car R&D and driverless research.

Compared with Yang Song's marketing strength, this new president is more experienced in product development, manufacturing, supply chain and industry forward-looking development.

However, it is rare for the top management of the company to change after the new shareholders have injected capital. It is reported that Yang Song is unlikely to switch to the commercial vehicle business. In the end, he and his team are still unknown.

Summary: No matter who is the funder, through the capital injection, the lifeblood of Borgward and UCAR is closely tied together. The platform advantage of UCAR in the car travelling and service and e-commerce marketing channels can indeed inject new vitality into Borgward. Although everything seems to be so fit and logical, we still have to make a big "question mark" for the future development of Borgward. The R&D, manufacturing, sales and after-sales of automobiles are a huge system construction, which requires enormous endeavor and financial support.

Especially in the case of the “cold winter” of capital market and auto industry, the future development of the auto industry will be a competition for survival of the fittest. The adaptation period of the executive team is necessary. Although the capital injection of shareholders can solve the temporary financial troubles, it is necessary to realize long-term development, clear brand positioning, improve the system structure and follow the development pace of the market.