History of BMW

BMW AG originated with three other manufacturing companies, Rapp Motorenwerke and Bayerische Flugzeugwerke (BFw) in Bavaria, and Fahrzeugfabrik Eisenach in Thuringia. Aircraft engine manufacturer Rapp Motorenwerke became Bayerische Motorenwerke in 1916. The engine manufacturer, which built proprietary industrial engines after World War I, was then bought by the owner of BFw who then merged BFw into BMW and moved the engine works onto BFw's premises. BFw's motorcycle sideline was improved upon by BMW and became an integral part of their business.

BMW became an automobile manufacturer in 1929 when it purchased Fahrzeugfabrik Eisenach, which, at the time, built Austin Sevens under licence under the Dixi marque. BMW's team of engineers progressively developed their cars from small Seven-based cars into six-cylinder luxury cars and, in 1936, began production of the BMW 328 sports car. Aircraft engines, motorcycles, and automobiles would be BMW's main products until World War II. During the war, against the wishes of its director Franz Josef Popp, BMW concentrated on aircraft engine production, with motorcycles as a side line and automobile manufacture stopped altogether.

After the war, BMW survived by making pots, pans, and bicycles until 1948, when it restarted motorcycle production. Meanwhile, BMW's factory in Eisenach fell in the Soviet occupation zone and the Soviets restarted production of pre-war BMW motorcycles and automobiles there. This continued until 1955, after which they concentrated on cars based on pre-war DKW designs. BMW began building cars in Bavaria in 1952 with the BMW 501 luxury saloon. Sales of their luxury saloons were too small to be profitable, so BMW supplemented this with building Isettas under licence. Slow sales of luxury cars and small profit margins from microcars caused the BMW board to consider selling the operation to Daimler-Benz. However, Herbert Quandt was convinced to purchase a controlling interest in BMW and to invest in its future.

Quandt's investment, along with profits from the BMW 700, brought about the BMW New Class and BMW New Six. These new products, along with the absorption of Hans Glas GmbH, gave BMW a sure footing on which to expand. BMW grew in strength, eventually acquiring the Rover Group (most of which was later divested), and the license to build automobiles under the Rolls-Royce marque.

Early history

Otto-Flugzeugwerke

A series of double-hulled aircraft for Russia at the Otto factories

Gustav Otto was the son of Nikolaus August Otto, the inventor of the four-stroke internal combustion engine. Gustav was a pioneer aviator in Bavaria.

an Otto B-type pusher biplane, license-built by Pfalz, in front of the Pfalz factory, circa 1914

In 1910, Otto received German aviation license no. 34 and, in the same year, set up a training school and an aircraft factory, The factory, which was named Otto-Flugzeugwerke in 1913, was located on Lerchenauer Strasse, east of the Oberwiesenfeld troop maneuver area in the Milbertshofen district of Munich. Otto concentrated on building Farman inspired pushers (he had got his own license on an Aviatik-Farman), and soon became the main supplier for the Bayerische Fliegertruppen (Royal Bavarian Flying Corps). Neither the Otto-Werke nor his AGO Werke companies, which from 1914 developed different aircraft, was successful in getting orders from the Prussian military due to unexplained quality issues. The military urged Otto to revise his production line, but the issues were never resolved. Suffering financially, the Otto company was purchased by a consortium, which included MAN AG as well as some banks, in February 1916. One month later, on this company’s premises, the investors established a new business, Bayerische Flugzeugwerke AG. AGO closed down in 1918, and its facilities were taken over by AEG.

Rapp Motorenwerke

In 1913 Karl Rapp established Rapp Motorenwerke near the Oberwiesenfeld. Rapp had chosen the site because it was close to Gustav Otto Flugmaschinenfabrik, with whom he had contracts to supply his four-cylinder aircraft engines.

Rapp was sub-contracted by Austro-Daimler to manufacture their V12 aircraft engines. Austro-Daimler at the time was unable to meet its own demands to build V12 Aero engines. The officer supervising aero-engine building at Austro-Daimler on behalf of the Austrian government was Franz Josef Popp. When it was decided to produce Austro-Daimler engines at Rapp Motorenwerke, Popp was delegated to Munich from Vienna to supervise engine quality.

However, Popp did not restrict himself to the role of observer, but became actively involved in the overall management of the company. On 7 March 1916, Rapp Motorenwerke became Bayerische Motoren Werke GmbH. Popp was also the person who convinced Karl Rapp to accept the application of Max Friz, a young aircraft engine designer and engineer at Daimler. At first Rapp was going to turn down Friz’s request; however, Popp successfully intervened on Friz’s behalf, because he recognized that Rapp Motorenwerke lacked an able designer. In the space of a few weeks he designed a new aircraft engine which, with an innovative carburettor and a variety of other technical details, was superior to any other German aero-engine. Later, this engine would gain world renown under the designation “BMW IIIa”.^{[citation needed]}

The recognition that Max Friz gained with his engine made it clear to all the senior managers that up to now Karl Rapp and his inadequate engine designs had held the company back from success. In Friz they now had an excellent chief designer on hand and were no longer dependent on Rapp.

Bayerische Flugzeugwerke (BFW)

In February 1916, the south German engineering company MAN AG and several banks purchased the aircraft builder Gustav Otto Flugmaschinenfabrik. On this company’s premises the investors established a new business, Bayerische Flugzeugwerke AG (BFW). There was no time for development work, so BFW manufactured aircraft under license from the Albatros Flugzeugwerke of Berlin. This meant that within a month of being set up, the company was able to supply aircraft to the war ministries of Prussia and Bavaria. However, major quality problems were encountered at the start. The German air crews frequently complained about the serious defects that appeared in the first machines from BFW. The same thing had happened with the aircraft from the predecessor company run by Gustav Otto. The reason for these deficiencies was a lack of precision in production. The majority of the workforce had been taken over by BFW from Otto Flugzeugwerke. It was only organizational changes and more intensive supervision of the assembly line that succeeded in resolving these problems by the end of 1916. This done, BFW was able, in the months that followed, to turn out over 100 aircraft per month with a workforce of around 3,000, and rose to become the largest aircraft manufacturer in Bavaria.

Helios motorcycle built by BFW before the merger with BMW. The M2B15 engine was supplied by BMW

The end of the war hit BFW hard, since military demand for aircraft collapsed. The company’s management were thus forced to look for new products with which to maintain their position in the market. Since World War I aircraft were largely built from wood to keep their weight down, BFW was equipped with the very latest joinery plant. What is more, the company still held stocks of materials sufficient for about 200 aircraft, and worth 4.7 million reichsmarks. It therefore seemed a good idea to use both the machinery and the materials for the production of furniture and fitted kitchens. In addition, from 1921 onwards, the company manufactured motorcycles of its own design under the names of Flink and Helios.

Advertisement for BFW in 1916

In the autumn of 1921 the Austrian financier Camillo Castiglioni first announced his interest in purchasing BFW. While most of the shareholders accepted his offer, MAN AG initially held on to its shareholding in BFW. But Castiglioni wanted to acquire all the shares. He was supported in this by BMW’s Managing Director Franz Josef Popp who, in a letter to the chairman of MAN, described BFW as a “dead factory, which possesses no plant worth mentioning, and consists very largely of dilapidated and unsuitable wooden sheds situated in a town that is extremely unfavorable for industrial activities and whose status continues to give little cause for enthusiasm”. Apparently Popp was still in close contact with Castiglioni and was perhaps even privy to the latter’s plans for merging BMW with BFW. It was probably in the spring of 1922 that Castiglioni and Popp persuaded MAN to give up its shares in BFW, so that now the company belonged exclusively to Castiglioni. Then in May of the same year, when the Italian-born investor was able to acquire BMW’s engine business from Knorr-Bremse, nothing more stood in the way of a merger between the aircraft company BFW and the engine builders BMW.

The name Bayerische Flugzeugwerke AG was revived in 1926 when Udet-Flugzeugbau GmbH was changed into a joint-stock company. In the early stages, BMW AG held a stake in this company and was represented by Popp, who held a place on the Supervisory Board. In time this company was renamed to Messerschmitt, an important and leading aircraft company for the Third Reich.

Bayerische Motoren Werke GmbH 1917

The departure of Karl Rapp enabled a fundamental restructuring of BMW GmbH, formerly Rapp Motorenwerke. While the development side was placed under Max Friz, Franz Josef Popp took over the post of Managing Director. Popp held this key position until his retirement in 1942, and was instrumental in shaping the future of BMW.

BMW logo

BMW roundel on a 1939 BMW motorcycle

Flag of Bavaria

The name-change to Bayerische Motoren Werke compelled management to devise a new logo for the company, therefore the famous BMW trademark is designed and patented at this time. However, they remained true to the imagery of the previous Rapp Motorenwerke emblem (which was designed by Karl's brother, Ottmar Rapp). Thus, both the old and the new logo were built up in the same way: the company name was placed in a black circle, which was once again given a pictorial form by placing a symbol within it. By analogy with this, the blue and white panels of the Bavarian national flag were placed at the center of the BMW logo. Not until the late 1920s was the logo lent a new interpretation as representing a rotating propeller. The BMW Trademark, called a "roundel", was submitted for registration on the rolls of the Imperial Patent Office, and registered there with no. 221388 on 10 Dec 1917.^{[citation needed]}

Growth

For the small BMW business, the large orders received from the Reichswehr for the BMW IIIa engine were overwhelming. Under Karl Rapp only a small number of engines had been produced and the manufacturing facilities were not in any way adequate to handle the mass production now required. Not only did BMW lack suitable machine tools but, to a very large degree, skilled manpower as well. However, the most serious drawback was in the small and aging workshops. Nevertheless, under the state-controlled war economy, officials in the relevant ministries were able to give BMW extensive practical support. So in a short time BMW got the skilled workers and machinery it needed. In addition, the Munich company received a high level of financial assistance, which enabled it to build a completely new factory from the ground up, in the immediate vicinity of the old workshops. Due to the share capital being too small, both the building of the new plant and the working capital needed for materials and wages had to be financed with external funds, i.e. bank loans or state assistance. The war ministries of Bavaria and Prussia (then both separate kingdoms within the Kaiser’s Empire) did not, however, wish to go on supporting BMW with loans and guarantees, and therefore urged the flotation of a public limited company.

BMW GmbH goes public

In 1917 Julius Auspitzer’s son-in-law, Max Wiedmann, held about 80 percent of the shares in Rapp Motorenwerke. He had obtained most of these shares from his father-in- law in 1914 and had thus become a figure of great influence in the business. Even after the name-change to Bayerische Motoren Werke GmbH, Wiedmann remained the principal shareholder in the company. Wiedmann’s capitulation in July 1918 opened the way for the founding of a public limited company. On 13 August 1918 BMW AG was entered as a new company in the Commercial Register and took over from BMW GmbH all its manufacturing assets, order book and workforce. The old BMW GmbH was renamed "Maschinenwerke Schleißheimerstrasse" and was wound up on 12 November 1918. The share capital of BMW AG amounting to 12 million reichsmarks was subscribed by three groups of investors. One third of the shares was taken up in equal parts by the Bayerische Bank and the Norddeutsche Bank. A further third of the shares (worth 4 million reichsmarks) was acquired by the Nuremberg industrialist, Fritz Neumeyer. This ensured that 50 percent of the capital (6 million reichsmarks) was in the hands of Bavarian businesses or banks. The Bavarian government placed the highest value on this strong local shareholding. The final one-third of the BMW shares were taken up by a Viennese financier, Camillo Castiglioni. During the war, Castiglioni had been one of the principal players in the Austro-Hungarian aircraft industry, and for a long time had had links with Rapp Motorenwerke. So he had probably already been influential in negotiating the major order from Austro-Daimler Motoren to Rapp Motorenwerke in 1916 and would have received a large commission on this. However, Castiglioni’s interests were not restricted to Austria. As early as 1915, by merging a number of companies, he had founded Brandenburgische Flugzeugwerke in the Berlin area, which supplied aircraft to the German navy. It seemed only logical that he would want to extend his network of companies by adding a German aero-engine manufacturer.

BMW is forced to close down

The end of the war in November 1918 had a huge impact on the entire German aircraft industry. Since 1914 the military had been placing lucrative orders with aircraft and aero-engine firms. But now, military demand collapsed completely. However, civil aviation was still in its infancy, and no substitute business could be expected from that quarter. The end of the war hit BMW particularly hard, since the BMW IIIa aero-engine was the only product the company was building in 1918. And suddenly there was no more demand for aircraft engines. In the years from 1914 to 1918 the German economy had been placed on a war footing. In order to enable companies to resume civil production as rapidly as possible, a central demobilization office was set up as soon as the war was over, and branches opened right across Germany. The Commissioner for Demobilization with responsibility for Bavaria ordered the closure of BMW’s Munich plant with effect from 6 December 1918. The employees of the fledgling company faced locked factory gates and a future that was far from certain. The reason given by the civil servants for this factory closure was the general shortage of raw materials such as coal and metals. The small supplies of coal that were still on hand had to be made available for the freezing population, and such supplies of metals as remained were diverted to consumer industries. As a former armaments manufacturer, BMW was sent away empty-handed.

First crisis for BMW AG – WWI aftermath

BMW’s top management was not discouraged by the compulsory closure decreed by the government. When permission was given for the gates to re-open on 1 February 1919, Managing Director Franz Josef Popp got the design department working constantly in order to have new products ready to sell to the peacetime market. Engines were designed for boats, cars, trucks and motorcycles. From the outset, BMW tried to remain an engine manufacturer. At the same time it also supplied industrial customers with products from its aluminum foundry.^{[citation needed]}

In 1919 BMW was forced to give up building aircraft engines completely, which it had initially continued on a modest scale. The Allies had banned Germany from building aircraft and aircraft engines, and in addition had demanded that all aviation assets manufactured up to that date should be handed over or destroyed. While the new BMW products for civilian use were technically advanced, they could not provide the company with any long-term security in a highly competitive market. The top management therefore began looking for alternatives.^{[citation needed]}

On 18 June 1919, BMW obtained a license agreement for the production of brake assemblies with the Berlin-based company Knorr-Bremse AG. The contract was to run for ten years and was intended to provide BMW with employment and profits until 1930. At that time, Knorr-Bremse manufactured state-of-the-art pneumatic brakes for trains and had the benefit of large, long-term contracts, which it could not, however, handle at its own factory. For this reason the Berlin company was looking for a manufacturer to license – and found it in Munich. One advantage BMW had in negotiating the contract was the announcement by the Bavarian government that they would be prepared to fit Bavarian trains with Knorr brakes provided they were manufactured in Bavaria.^{[citation needed]}

BMW loses its independence

From the summer of 1919 onward, the manufacture of pneumatic brakes increasingly overshadowed engine production. The brake business occupied the majority of the BMW workforce, which was once again being expanded. This reorientation of the BMW product range had an effect on the ownership structure. As soon as the war ended, most of the BMW shareholders had lost interest in the company. Only the major shareholder Camillo Castiglioni still believed at first that BMW had a future, and took up all the company shares himself. However, Castiglioni was not an entrepreneur who took the long view; he was an astute financier in search of a quick return. The manufacture of railway brakes provided an opportunity to build up a solid business with sure profits, albeit small ones – too small for Castiglioni. In August 1920, when the chairman of Knorr-Bremse AG, Johannes Vielmetter, offered to buy all of Castiglioni's shares in BMW, the Viennese speculator accepted. BMW was now wholly owned by the Knorr-Bremse company of Berlin. The new proprietors made only minor alterations to the structure of BMW, since they wished neither to change the management nor to get involved in the production process.

Return of Camillo Castiglioni

Under the leadership of Knorr-Bremse, BMW’s growth was considerable. Between the end of 1918 and 1921 the workforce grew from 800 to 1,800. In addition, the company set up its own training program with classes at the factory. In this way, in 1921 alone, BMW was able to offer solid technical training to some 200 young people. However, the price for this comfortable commercial situation was dependence on Knorr-Bremse and the abandonment of its core business of building aircraft engines.

In 1922, Camillo Castiglioni, offered to buy BMW's engine-building division, aluminum foundry, name, and trademark from Knorr-Bremse. Castiglioni declared that he intended to set up an engine manufacturing plant of his own, and so he asked for the drawings, patents and machine tools needed for manufacturing the engines. He also wanted to take with him to his new company several key figures such as the chief designer, Max Friz, and the chief executive, Franz Josef Popp. The remainder of the company, including the premises, would remain under Knorr-Bremse's ownership and would be renamed. His offer of 75 million reichsmarks was accepted by Knorr-Bremse and, upon the contract being signed on 20 May 1922, the BMW engine-building business was once again in Castiglioni’s hands, while the remainder of the company became a subsidiary of Knorr-Bremse and was renamed Südbremse AG.

BMW AG here to stay

Castiglioni did not purchase BMW's premises in its transaction with Knorr-Bremse. Instead, he merged his Bayerische Flugzeugwerke (BFw) into BMW and established BMW's factory and headquarters at BFw's premises. BMW was moved into the same buildings of Gustav Otto's former Otto-Flugzeugwerke on Lerchenauer Strasse 76. BMW's headquarters have been at that address ever since.

BMW, with some 200 workers housed in the former BFw's old wooden sheds, began production on a modest scale. Initially its output was BFw motorcycles, proprietary engines, and spare parts for aircraft engines. To begin with, business for the “new” BMW AG did not go particularly well. The market for proprietary engines was still as hotly contested in 1921 as it had been in 1919 when BMW had gone into brake manufacture as a way of securing its long-term future.^{[citation needed]}

In light of these circumstances, the purchase of BMW by a skilled and experienced financier like Castiglioni appears incomprehensible. However, in acquiring the BMW engine-building business, Castiglioni was not envisaging production in Germany at all; he had already secured a different deal. Czechoslovakia was looking for suitable engines to equip its air force and was thinking, among others, of BMW products. Castiglioni had heard of the Czechoslovak military’s interest and had perhaps even encouraged it, as he was now in a position to offer BMW aircraft engines to the Czechoslovaks. Shortly after taking over BMW, Castiglioni concluded an agreement with the Czechoslovak government for the BMW IIIa and BMW IV models to be manufactured under license by Walter Company of Prague (not to be confused with Walter Kommanditgesellschaft, Kiel). The substantial profits from this contract, which ran until the early 1930s, went solely into Castiglioni’s pocket; BMW made nothing at all out of it.^{[citation needed]}

Aero engines for Russia

The aircraft engine business with Russia secured BMW's success in the 1920s. Meanwhile the competition, Junkers in particular, were confounded as to how BMW was managing to pay out such huge dividends. They conjectured that BMW was the victim of stock market speculation and would soon face bankruptcy. Others made allegations that the Munich company was receiving millions of marks in government subsidies. But all these conjectures were wide of the mark. BMW had merely succeeded in securing Eastern Europe's biggest customer early on: the air force of the Red Army. However, while BMW benefited from these business deals with Russia, sole shareholder Castiglioni benefited even more. As an alleged brokerage fee, ten percent of the gross price of each aircraft engine delivered to Russia was paid, through shadow companies, to Castiglioni. In 1926, the financier from Vienna had to transfer over his majority shareholding to Deutsche Bank to resolve financial difficulties, but he continued as a major shareholder of BMW.

The “commission payments” to Castiglioni's companies continued until 1928, when an informer tipped off Deutsche Bank about Castiglioni's unusual accounting methods. The bank had his accounts investigated retrospectively. To avoid a court case, Castiglioni paid BMW one million reichsmarks. As a result of these disturbing revelations, he was no longer tenable to hold a position as a member of the Supervisory Board. When he ran into financial difficulty once again, Deutsche Bank managed to buy the remaining BMW shares from him. The Castiglioni era came to an end in 1929.

The Russian commercial agency in Berlin became aware of the commission payments and felt ten percent too much had been paid for years. Arbitration proceedings led to an agreement that BMW would agree to give the Russians the license for the BMW VI aircraft engine free of charge. In the aftermath, BMW tried desperately to win new contracts from the Soviets, but failed to do so. BMW's Russian deal ended in 1931.

1923 – the year of decisions

In 1922 BMW had once again become independent, and owed this position to its new major shareholder, Castiglioni. However, Castiglioni was only interested in making a "quick buck", which he did through the license agreement with Czechoslovakia, his "commission payments" from Russia, and various other deals. The long-term future of BMW was secured by the efforts of its employees and senior management at that time. In particular, the commitment to BMW of chief executive Franz Josef Popp and chief designer Max Friz established the company as a permanent international player in the building of aircraft engines and motorcycles.

In this respect, 1923 was a year of great significance, and it can justifiably be called a decisive year for BMW. While Germany was forced to live through a year of runaway inflation and numerous attempted coups, the Munich company made a successful new start – for it was in 1923 that BMW resumed production of aviation engines. A crucial factor in this was the interest shown by the Soviet Union in BMW aircraft engines and the solid prospect of large orders. In the years that followed, the Soviet Union was to become BMW’s most important customer. In addition to this, on 28 September 1923, BMW launched the first motorcycle of its own design, the R32. The R32 was the first in a series of products that would prove successful and profitable over the following years.

R32 motorcycle

Main article: History of BMW motorcycles

R32: the first BMW motorcycle

At the German Motor Show in Berlin (September 28 – October 7, 1923) BMW exhibited the R32 to the public for the first time. The first motorcycle from BMW convinced the experts immediately, and was an instantly popular product with consumers. A comment in the magazine DER MOTORWAGEN read: "And finally, the culmination of the exhibition, the new BMW motorcycle (494 cc) with the cylinders arranged transversely. Despite its youth it is a remarkably fast and successful motorcycle."

In 1924 BMW built its first model motorcycle, the R32. This had a 500 cc air-cooled horizontally opposed engine, a feature that would resonate among their various models for decades to come, albeit with displacement increases and newer technology. The major innovation was the use of a driveshaft instead of a chain to drive the rear wheel. To this day the driveshaft and boxer engine are still used on BMW motorcycles.

Automobiles

Austin-licensed BMW Dixi

BMW's first automobile, the BMW Dixi

BMW’s automobile history had begun much earlier than 1924, if only in the form of proposals and prototypes. Correspondence dating back to 1918 shows the first use of the term “automobile” in BMW history. But no details, let alone images have come down to us regarding this fourwheeled primogenitor. Subsequently, BMW manufactured various built-in motors with four and two cylinders that powered a wide variety of agricultural vehicles in the early 1920s. The spectrum of machinery driven across the land by BMW units ranged from single-track cars to huge farm tractors. Around 1925 two specially hired BMW designers, Max Friz and Gotthilf Dürrwächter, both former employees of Daimler-Benz in Stuttgart, were commissioned by BMW’s Managing Director Franz Josef Popp to design a BMW production car. From this first, demonstrably operational BMW car – though as yet lacking any bodywork, BMW laid the groundwork for one of the world's most respected manufacturer of automobiles.

Success for BMW in this industry came from an already proven source-the Seven. In 1927 the tiny Dixi, an Austin Seven produced under license, began production in Eisenach. BMW bought the Dixi Company the following year, and this became the company's first car, the BMW 3/15.

BMW designs its own cars

Towards the end of 1930, BMW attempted to introduce a new front axle with independent wheel suspension for both their models, the BMW 'Dixi' 3/15 DA4 and BMW 'Wartburg' DA3, but this resulted in accidents with the prototypes because of construction faults. However, as the license with Austin would end in 1932, BMW decided upon the development of a completely new model and called in the help of German engineer Josef Ganz. He was hired as a consultant engineer at BMW in July 1931. At first, Josef Ganz negotiated with BMW about possible manufacture of his innovative rear-engined Maikäfer prototype at BMW. However, BMW decided for a different model, more along the lines of the previous Dixi model. Therefore, with the assistance of Ganz, work started on the development of the BMW AM1 (Automobilkonstruktion München 1), a small car with a front-mounted engine, rear-wheel drive, and independent wheel suspension with swing-axles. The BMW AM1 was introduced in the first half of 1932 and quickly became a great success. This enhanced Germanies's economy tremendously. Sales started booming again, other auto mobile manufactures felt the pinch, munufactures I wouldn't mantion. Edited by. Tshireletso

World War II

The German invasion of Poland and commencement of hostilities meant that manufacturing facilities in Germany were directed by the Nazi regime to re-focus on the manufacture of products required to support the war effort. For BMW, that meant an emphasis on production of aero (airplane) engines. Josef Popp argued against this, contending that, although financially lucrative, the change in focus would mean that the BMW AG would be heavily dependent on decisions made by the Nazi regime. In June 1940, he wrote to the Chairman of the Supervisory Board, Emil Georg von Stauss, explaining that the situation could “threaten the very existence of BMW AG if there were any setback to aero engine production”. This change in focus did in fact lead to a significant increase in external control from political and military agencies, weakening the position of the BMW management and eroding the position of Franz Josef Popp, whose leadership of BMW had been relatively autonomous and autocratic to that point. Statutes enacted on October 1, 1940 required all subsidiaries to transfer profit and loss responsibility to BMW AG. Expansion of the aero engine business required several injections of capital to Flugmotorenbau GmbH, with the total capitalization of BMW AG increasing in stages to RM 100 million by 1944. Further restructuring was carried out in 1944, with centralization of sales in BMW AG and the GmbHs acting only as property companies.

The emphasis on aero engines caused significant changes in BMW AG's business. Motorcycle production located at the Munich manufancturing facility abandoned production of non-military motorcycles by 1940, producting only the R12 and the R75, which were supplied to the Wehrmacht. At the beginning of 1942, motorcycle production was transferred to Eisenach so that the Munich plant could be dedicated to aero engine fabrication, and in 1942, BMW abandoned motorcycle production altogether. BMW also ceased production of automobiles in 1940, since cars were not being producted for the military. Only automobile repair facilities were retained, along with a development department.

A wide range of aero engines were ultimately produced for the Luftwaffe, including one of the most powerful engines of the time - the BMW 801. Over 30,000 aero engines were manufactured through 1945, as well as over 500 jet engines such as the BMW 003. To enable this massive production effort, forced labor was utilized, consisting primarily of prisoners from concentration camps such as Dachau. By the end of the war, almost 50% of the 50,000 person workforce at BMW AG consisted of prisoners from concentration camps.

BMW AG plants were confiscated by Allied troops at the end of the war, and production of aero and jet engines for the Luftwaffe was shut down.

Second crisis for BMW AG – WWII aftermath

1954 BMW 502 V8 Super

The acclaimed 1956 BMW 507

BMW AG was heavily bombed towards the end of the war, reducing most of the company's production facilities to rubble. In fact, by the end of the war, the Munich plant was completely destroyed. Of its sites, those in eastern Germany (Eisenach-Dürrerhof, Wandlitz-Basdorf and Zühlsdorf) were seized by the Soviets. After the war the Munich factory took some time to restart production in any volume. BMW was banned from manufacturing for three years by the Allies and did not produce a motorcycle, the R24, until 1948, and a car model until 1952. During the three year ban BMW used scraps and what resources they had available to manufacture bicycles and kitchen supplies.

In the east, the company's factory at Eisenach was taken over by the Soviet Awtowelo group which formed finally the Eisenacher Motor-Werke. That company offered "BMWs" for sale until 1951, when the Bavarian company prevented use of the trademarks: the name, the logo and the "double-kidney" radiator grille.

The cars and motorcycles were then branded EMW (Eisenacher Motoren-Werke), production continuing until 1955.

BMW Isetta- sales of this car saved the company in post WWII Germany

In the west, the BAC, Bristol Aeroplane Company, inspected the factory, and returned to Britain with plans for the 326, 327 and 328 models. These plans, which became official war reparations, along with BMW engineer Fritz Fiedler allowed the newly formed Bristol Cars to produce a new, high-quality sports saloon (sedan), the 400 by 1947, a car so similar to the BMW 327 that it even kept the famous BMW grille.

In 1948 BMW produced its first postwar motorcycle and in 1952 it produced its first passenger car since the war. However, its car models were not commercially successful; models such as the acclaimed BMW 507 and 503 were too expensive to build profitably and were low volume.

By the late 1950s, it was also making bubble-cars such as the Isetta.

Third crisis for BMW AG – a company for sale

BMW 1602

In 1959, after BMW had survived takeover attempts made by American Motors and the Rootes Group, the chairman of BMW's supervisory board suggested a merger with Daimler-Benz. The dealers and small shareholders opposed this suggestion and rallied around a counter-proposal, which gained enough support to stop the merger. At that time, the Quandt Group, led by half-brothers Herbert and Harald Quandt, stepson of the Third Reich Minister of Propaganda Joseph Goebbels, had recently increased their holdings in BMW and had become their largest shareholder. By the end of November 1960, the Quandts owned two-thirds of BMW's stock between them.

By this time BMW had launched the 700, a small car with an air-cooled, rear-mounted 697 cc boxer engine derived from the engine powering the R67 motorcycle. It was available as a 2-door sedan and as a coupe, both versions having been designed by Giovanni Michelotti. There was also a more powerful RS model for racing. Competition successes in the 700 began to secure BMW's reputation for sports sedans.^{[citation needed]}

At the Frankfurt Motor Show in 1961, BMW launched the 1500, a compact sedan with front disc brakes and four-wheel independent suspension. This modern specification further cemented BMW's reputation for sporting cars. It was the first BMW to officially feature the "Hofmeister kink", the rear window line that has been the hallmark of all BMWs since then.^{[citation needed]}

The "New Class" 1500 was developed into 1600 and 1800 models. In 1966, the two-door version of the 1600 was launched, along with a convertible in 1967. These models began the '02' series, of which the 2002 was the best known, and which was continued until 1976 when it was replaced by the BMW 3 Series.

By 1963, with the company back on its feet, BMW offered dividends to its shareholders for the first time since before World War II.^{[citation needed]}

Expansion- Hans Glas GmbH

München, BMW Autowerk, 1968

By 1966, the Munich plant had reached the limits of its production capacity. Although BMW had initially planned to build an entirely new factory, the company bought the crisis-ridden Hans Glas GmbH with its factories in Dingolfing and Landshut. Both plants were restructured, and in the following decades BMW's largest plant took shape in Dingolfing.

BMW 5 series (E12)

In 1968, BMW launched its large "New Six" sedans, the 2500, 2800, and American Bavaria, and coupés, the 2.5 CS and 2800 CS.

Of major importance to BMW was the arrival of Eberhard von Kuenheim from Daimler-Benz AG. Just 40 years old, he presided over the company's transformation from a national firm with a European-focused reputation into a global brand with international prestige.

Already commercially successful by the mid 60s, in December 1971, BMW moved to the new HQ present in Munich, architecturally modeled after four cylinders.

In 1972, the 5 Series was launched to replace the New Six sedans, with a body styled by Bertone. The new class coupes were replaced by the 3 Series in 1975, and newly introduced larger sedans became the 7 Series in 1977. Thus the three-tier sports sedan range was formed, and BMW essentially followed this formula into the 1990s. Other cars, like the 6 Series coupes that replaced the CS and the M1, were also added to the mix as the market demanded.

From 1970 to 1993, under von Kuenheim, turnover increased 18-fold, car production quadrupled and motorcycle production tripled.

Rover

The Rover 75, the only new Rover released under BMW

Between 1994 and 2000, under the leadership of Bernd Pischetsrieder, BMW owned the Rover Group in an attempt to get into mass market production, buying it from British Aerospace. This brought the active Rover, Mini and Land Rover brands as well as rights to many dormant marques such as Austin, Morris, Riley, Triumph and Wolseley under BMW ownership.

The venture was not successful. For years, Rover tried to rival BMW, if not in product, then in market positioning and "snob appeal". BMW found it difficult to reposition the English automaker alongside its own products and the Rover division was faced with endless changes in its marketing strategy. In the six years under BMW, Rover was positioned as a premium automaker, a mass-market automaker, a division of BMW and an independent unit. A five part BBC documentary, When Rover Met BMW (1996), gave some insight into the difficulties faced by the two firms.

BMW was more successful with the Mini, MG and Land Rover brands, which did not have parallels in its own range at the time.

In 2000, BMW disposed of Rover after years of losses, with Rover cars going to the Phoenix Venture Holdings for a nominal £10 and Land Rover going to the Ford Motor Company. The German press ridiculed the English firm as "The English Patient", after the film. BMW itself, protected by its product range's image, was largely spared the blame. Even the British press was not particularly sympathetic towards Rover.

BMW retained the rights to Mini, Triumph and other marques. MINI has been a highly successful business, though the other names have not been used yet. Following the bankruptcy of MG Rover in 2005, the Rover name was sold to Ford in 2006 after BMW gave it a first refusal offer in 2000. However, Ford did not release any Rover-badged cars before selling the name to Tata Group, while the MG brand has been relaunched by Nanjing Automobile of China.

Redesign controversy

In the early 2000s, BMW undertook another of its periodic cycles of redoing the design language of its various series of vehicles, under the auspices of newly promoted design chief Christopher Bangle. These controversial designs often featured unconventional proportions with complex concave and convex curved surfaces combined with sharp panel creases and slashes, a design cue called "flame surfacing". Much of the new language did not rest well with BMW enthusiasts or the automotive press which referred to the new designs as "Bangled" or "Bangle-ised". Although Bangle did not pen all of the new designs himself, as the design chief he was ultimately responsible for the direction that the company took and thus received much of the criticism. As Bangle has now been promoted within the company to the BMW Group Head of Design, leaving him in charge of not only BMW but also Rolls-Royce and Mini, some questioned what long term effect the disaffection of BMW traditionalists for these designs will have on sales, and on the company's future. Sales at BMW have increased every year since some of his most debated designs have gone into production.^{[citation needed]}

Many aspects of the "controversial" designs are now beginning to surface in other auto manufacturer's designs.^{[citation needed]} Though the design debuted and was popularized by BMW's 7-Series, Hyundai incorporated this design cue in 1999, three years before the 7-Series was released, and Maybach incorporated it since its first showing in 1997.

Bangle was also responsible for many 'conservative' BMW designs and has worked at BMW for almost a decade. The first X5 sketches (which closely resembled the production car), were designed by him, and under his tenure the E46 3 Series came to be. Despite much of the scorn heaped on Chris Bangle, his design selections were approved by the entire executive board of BMW AG, including the majority owners, the Quandt family.^{[citation needed]} BMW's design team has won numerous awards with him at the helm.

Production outside Germany

BMW's Rosslyn, South Africa, plant was the first BMW assembly line established outside Germany, with production starting in 1973. The wholly owned subsidiary now exports over 70% of its output.^{[citation needed]} In the mid-1990s, BMW invested R1bn to upgrade the Rosslyn factory. The plant now exports over 50,000 3 Series cars a year^{[citation needed]}, mostly to the USA, Japan, Australia, Africa and the Middle East.

BMW started producing automobiles at its Spartanburg, South Carolina, plant in 1994. Today, the plant manufactures the BMW X5 and the BMW X6. The production of the BMW X3 will be moving to Spartanburg from Europe after the completion of a major expansion of the U.S. facility.

The Spartanburg plant is open six days a week, producing automobiles approximately 110 hours a week. It employs about 4,700 people and manufactures over 600 vehicles daily. Recently, the plant has undergone a major renovation switching from 2 production lines down to one. Both the X5 and the X6 are produced in the same line, one right after the other.

Outside Germany, the largest output of the BMW Group comes from British factories. The Hams Hall plant manufactures four-cylinder BMW engines for use around the world in 3-Series, 1-Series and Z4 vehicles. This is in addition to MINIs and Rolls-Royces made in Oxford and Goodwood.

BMW signed agreement in 1999 with Avtotor to produce cars in Kaliningrad, Russia. Factory has been assembling 3 and 5 -series cars.

Starting from October 2004, BMWs intended for the Chinese market are produced in Shenyang, China. BMW has established a joint venture with Chinese manufacturer Brilliance to build BMW 3 Series and 5 Series that have been modified for the needs of local markets.

The BMW X3 was manufactured in Graz, Austria between 2004 and 2007 by Magna Steyr with mainly German components. The X3 production will be moved to the Spartanburg plant due in part to high production and transportation costs of what was meant to be the "more affordable" SUV. North American pricing, after said costs, were nearly on par with the larger, American-built X5.

In 2005, BMW Group built a new manufacturing facility in Egypt. This plant builds 3 Series, 5 Series, 7 Series, and X3 vehicles for the African and Middle East markets.

BMW opened its first assembly plant in Chennai, India in March 2007 to assemble 3-series and 5-series vehicles. The 20 Million Euro plant aims to produce 1,700 cars per year in the medium term, though this could rise to up to 10,000 cars if demand grows. The new factory may also be used to help boost the production of BMW’s super-successful MINI. BMW India headquarters is located in Gurgaon outside Delhi.

Rolls-Royce

In the early 1990s, BMW and Rolls-Royce Motors began a joint venture that would see the new Rolls-Royce Silver Seraph and Bentley Arnage adopt BMW engines.

In 1998, both BMW and Volkswagen tried to purchase Rolls-Royce Motors. Volkswagen outbid BMW and bought the company for £430 million, but BMW outflanked its German rival. Although Volkswagen had bought rights to the "Spirit of Ecstasy" mascot and the shape of the radiator grille, it lacked rights to the Rolls-Royce name. Rolls-Royce plc (the aero-engine business) retained the rights over the Rolls-Royce trademark and wished to strengthen its existing business partnership with BMW which extended to the BMW Rolls-Royce joint venture. Consequently, BMW was later in 1998 allowed to acquire the rights to use the name "Rolls-Royce and "RR" logo on cars for £40 million.

In a separate deal BMW agreed to let Volkswagen use the name "Rolls-Royce and "RR" logo on cars until 2003 on condition that BMW would get the right to the grille and mascot from 2003, onwards.

BMW supplied the engines to the current Seraph/Arnage range and their supply contract had a clause that allowed BMW to stop the supply of engines the day another owner, (than then Vickers plc), took over the company. BMW could effectively stop Volkswagens Seraph/Arnage production. This might have biased the deal.

Anyway, Volkswagen was permitted to build Rolls-Royces with all three trademarks at its Crewe factory only until 2003, but quickly shifted its emphasis to the Bentley brand. BMW would have all the three key trademarks in 2003.

In the meantime, BMW was faced with the need to build a new factory and develop a new model. The new factory at Goodwood produced the new Rolls-Royce Phantom, unveiled on January 2, 2003, and officially launched at the Detroit Auto Show on January 5, 2003. The model, priced around US$330,000, has experienced record sales worldwide of 796 Phantoms sold in 2005.

See also

BMW AG

Further reading

• Halwart Schrader, Automobile Quarterly Editors (1985). The History of BMW. Dutton Books. ISBN 0-525-12522-1. http://books.google.com.au/books?id=i-ZuAQAACAAJ. 
• Halwart Schrader, Ron Wakefield (1979). Bmw: A History. Motorbooks Intl. ISBN 0-915038-15-3. http://books.google.com.au/books?id=5e1aJgAACAAJ. 

External links

• BMW Group archives
• BMW models history in pictures