Chinese Investors Buy Up German Auto Parts Firms

Chinese investors are increasingly buying German firms – for example, car parts manufacturers behind one-of-a-kind technology. Is there reason for concern?

It's hot and loud on the factory floor of Boge Elastmetall, and it smells like a mixture of solvent, paint, and rubber. The company, located in Damme in Lower Saxony, develops car parts that most people have never heard of - but drivers would notice immediately if any of those parts were missing. Its components enable engines and chassis components to be mounted securely but flexibly, so that vibrations don't shake the car body.



German auto parts maker ZF has sold the factory and its ancillary businesses to Chinese company TMT. The main shareholder TMT is CSR, a Chinese state-owned enterprise which is the world's largest manufacturer of electric locomotives. In 2013, CSR earned 11.9 billion euros ($15.31 billion) and counted 90,000 employees.



Connection to famous enterprises



Why the interest in this German company?



"We ensure that the car and car parts don't shake as the car moves," says Boge CEO Torsten Bremer. Metal sleeves are treated with a special rubber compound -- that's the basic procedure, which is supplemented with additional high-tech treatments depending on component type.



Here's the deal: Through Boge Elastmetall, the Chinese receive a portfolio of famous auto enterprises as clients, such as VW, Ford, Damler, BMW, General Motors, Fiat/Chrysler and Renault/Nissan. In return, Boge gains access to better opportunities for growth in China, the world's most important automobile market.



The operating company remains in the hands of Boge, whose 2014 sales are expected to be around 780 million euros.



The mood has changed



Initially the plan to sell Boge to Chinese investors raised alarm amongst employees in Damme and the company's other locations in Bonn and Simmern. Demonstrations were held in Damme.



"40,000 signatures were collected here," remembers Bremer.



"That was a major tragedy for all of us," says Antonius Thölken, chair of the company's employee council. But the mood has since changed - now the team is motivated, he says. The 1,800 employees in Germany were given an employment guarantee until 2018, and a promise that the company would be developed further.



Positive experiences



"An entire bunch of suppliers have been sold to the Chinese in the past few years, and we've generally had positive experiences," says automotive industry analyst Ferdinand Dudenhöffer from the University of Duisberg-Essen.



There's a strong likelihood that the new investors really will continue to develop the businesses they buy, Dudenhöffer adds. A good example is Kiekert from Heiligenhaus, a supplier of key and lock systems, that was taken over by Chinese car parts supplier Lingyun in 2012.



Industry expert Stefan Bratzel from the Center of Automotive Management in Bergisch-Gladbach also sees the rise of Chinese investors as positive, despite the transfer of technical know-how from Germany to China. The trend, he says, offers growth opportunities for the businesses. It's inevitable that the Chinese will catch up to Germany technologically in the process.



"That can't be stopped. The world continues to turn," says Bratzel.



Boge is carrying on with its development plans. The grand theme: saving weight through using plastic components. A big seller at the moment is a new pedal kit made of plastics, which enables a savings of one and a half kilos compared to metal pedal sets.



"They're selling like hot cakes," says Bremer.



Now in development: A plastic transmission fixture is to replace a metal part, and thereby make cars a little lighter and more fuel-efficient. It's another example of German high-tech engineering development work financed by Chinese money.