History of BMW

History of BMW

BMW has survived three major crises that have threatened the company's very existence: The World War I, World War II, and a takeover bid by Daimler Benz. Each of these events shaped the company, leaving scars of hard times, as well as strengthening the company's resolve to not only survive, but to become a world renowned marque.

BMW AG has two fathers: Karl Rapp and Gustav Otto, both of whom paved the way for further developments in their fields, leaving distinct traces during aviation's pioneering days. In the absence of Karl Rapp, Gustav Otto, Max Friz or Camillo Castiglioni the company would probably never have been born. However, Franz Josef Popp can lay claim to being the prime force in the development of the company we know today. He was instrumental in the development of the company from 1916, and he was “General Director” of the company from its foundation as BMW AG until he was forced to relinquish his position in 1942.

Early history


Gustav Otto was the son of the wealthy Nikolaus August Otto, the inventor of the four-stroke internal combustion engine. Gustav was an aviator and one of the first flight pioneers in Bavaria. Along with a few others, Gustav flew machines made of wood, wire, canvas and powered by an engine. Through their passion for these flying machines, they helped transform aviation from a do-it-yourself hobby to a genuine industry vital to the military, especially after the breakout of World War I.

Gustav, in 1910, received the German aviation license no. 34, and, in the same year, set up a training school and a factory that came to be called Otto-Flugzeugwerke in 1913. The factory was located on Lerchenauer Strasse, east of the Oberwiesenfeld troop maneuver area in the Milbertshofen district of Munich (this area later became Munich's first airport). He 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). Both the Otto-Werke and his AGO Werke companies, which from 1914 developed different aircraft, were not successful in getting any 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, the facilities being taken over by AEG.

Rapp Motorenwerke

In 1913 Karl Rapp established Rapp Motorenwerke in a few wooden buildings of a former bicycle factory near the Oberwiesenfeld. This new company specialized in airplane engines.

After the outbreak of World War I, Rapp started to supply aeroengines to the Austrian army. However, the engines suffered severe vibration problems, causing the military to decline purchasing the poorly performing engines. Rapp would quickly have gone out of business if his main customer, Austrian military forces, had not had Austro-Daimler V12 aircraft engines built here during war under a license. 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 navy was Franz Josef Popp. When it was decided to produce Austro-Daimler engines at Rapp Motorenwerke, it was Popp who 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. 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 aero-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”.

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. On 25 July 1917 the partners in the company therefore terminated Karl Rapp’s contract. The end of this collaboration had been coming for a long time. When Rapp’s departure was finally a certainty, another important decision had to be made. If the man who had lent his name to the company was now leaving it, a new name was naturally required. So, on 21 July 1917, Rapp Motorenwerke GmbH was renamed Bayerische Motorenwerke GmbH.

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 Werke 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.

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 WWI 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.

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 AG, 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

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.Fact|date=August 2008 The inner area of the Rapp logo was decorated with the head of a black horse – "Rappe" in German.Fact|date=August 2008 By analogy with this, the blue and white panels of the Bavarian national flag were placed at the center of the BMW logo.Fact|date=August 2008 Not until the late 1920s was the logo lent a new interpretation as representing a rotating propeller.Fact|date=August 2008 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.Fact|date=August 2008 The trade mark was intended for the following goods: "Land, air and seagoing vehicles, automobiles, bicycles, accessories for automobiles and bicycles, vehicle components, stationary engines for solid, liquid and gaseous fuels and their components and accessories".Citequote|date=August 2008


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."Bayerische Motoren Werke GmbH" [http://www.historicalarchive.bmw.com/2/index.php BMW Historical Archives] ] 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. [Kiley, D. "Driven:Inside BMW, the Most Admired Car Company in the World"; Wiley 2004 ISDN 0471269204]

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. [Munich Commercial Register;Munich public records;13 August 1918] 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, from one day to the next. 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 AGndash WWI aftermath

However, BMW’s top management was not in the least 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 day and night in order to have new products ready to sell to the peacetime market. Engines were designed for boats, cars, trucks and motorcycles. So, from the outset, BMW tried to remain true to its identity as an engine manufacturer. But at the same time it also supplied industrial customers with products from its own aluminum foundry. In 1919 BMW was forced to give up building aero-engines completely, which it had initially continued on a modest scale. The Allies had banned Germany from building aircraft and aero-engines, and in addition had demanded that all aviation assets manufactured up to that date should be handed over or destroyed. It is true that the new BMW products for civilian use were technically advanced, but they could not provide the company with any long-term security in a highly competitive market. So the top management began looking round for alternatives. On 18 June 1919 they succeeded in concluding 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. Something that proved advantageous to BMW when concluding 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.

BMW loses its independence

From the summer of 1919 onward, the manufacture of pneumatic brakes increasingly overshadowed engine production. The lucrative brake business occupied the majority of the BMW workforce, which was once again on an expansion course. This reorientation of the BMW product range was not without its 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. But 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. So it was only to be expected that the Viennese speculator would accept an offer from the chairman of Knorr-Bremse AG, Johannes Vielmetter, and in August 1920 sold all his BMW shares. This meant that BMW was now wholly owned by the Knorr-Bremse company of Berlin. The new proprietors only made minor alterations to the structure of BMW, since they wished neither to change the management nor to get involved in the production process. However, this relative freedom for the Munich plant, which continued to carry the BMW name, could scarcely make up for the loss of its independence. Only three years after the name BMW had first been used, the company looked like being relegated to the role of another firm’s production site. It seemed doubtful whether the company could ever break free again from the grasp of Knorr-Bremse AG.

Return of Camillo Castiglioni

Under the aegis of Knorr-Bremse, BMW’s growth was quite 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 a 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 actual core business: building aero-engines. But then, in 1922 an unexpected opportunity arose for BMW. Camillo Castiglioni, the erstwhile founding shareholder, made Knorr-Bremse a tempting offer. He would buy back BMW – but not the whole business, only the “insignificant” engine-building division and aluminum foundry along with the BMW name and trademark. 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. His extremely generous offer of 75 million reichsmarks was willingly accepted by Knorr-Bremse. Thus, with a contract signed on 20 May 1922, the BMW engine-building business was once again in Castiglioni’s hands.

BMW AG here to stay

In May 1922 only the engine-building division and the BMW name were sold, not the whole company and its factory. The actual BMW company continued to be owned by Knorr-Bremse AG, but was no longer allowed to use the BMW name and had to be renamed Südbremse AG. As for the new headquarters for Bayerische Motoren Werke, Castiglioni had his eye on a firm in the immediate vicinity, an aircraft manufacturer called Bayerische Flugzeugwerke (BFW). This company had been part of Castiglioni’s business empire since the end of 1921. BMW was moved into the very same buildings of Gustav Otto's former Otto-Flugzeugwerke, and it is precisely here, on Lerchenauer Strasse 76, that BMW has maintained its roots ever since. [ [http://www.bmwgroup.com/bmwgroup_prod/e/nav/index.html?http://www.bmwgroup.com/bmwgroup_prod/e/0_0_www_bmwgroup_com/home/home.html BMW Group ] ] BFW was now renamed BMW and, with some 200 workers housed in old wooden sheds, it began production on a modest scale. Initially its output was BFW motorcycles, replacement engines and spare parts for aero-engines. To begin with, business for the “new” BMW AG did not go particularly well. The market for replacement 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. In the light of these circumstances, the purchase of BMW by a skilled and experienced financier like Castiglioni appears incomprehensible. But in acquiring the BMW engine-building business, Castiglioni was not envisaging production in Germany at all; he had already clinched 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 Czech military’s interest and had perhaps even encouraged it, as he was now in a position to offer BMW aero-engines to the Czechs. In fact, shortly after taking over BMW, Castiglioni managed to conclude an agreement with Prague for the BMW IIIa and BMW IV models to be manufactured under license. 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.

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. BMW wasn't the only beneficiary of these business deals with Russia. Sole shareholder Castiglioni was also raking in the money. His deals with Russia were once again conducted through his bogus companies. As an alleged brokerage fee, ten percent of the gross price of each aero-engine delivered to Russia found its way into Castiglioni's pocket. In 1926, the financier from Vienna had to transfer over his majority shareholding to Deutsche Bank to resolve his 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. End of the Russian business relations To avoid a court case, Castiglioni made a substantial payment of one million reichsmarks to BMW. 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. Since he had come on board in 1922, BMW had burgeoned and flourished. Successful motorcycle production had been established, the company had embarked on car production with the purchase of the Eisenach Car Factory in 1928, and thanks to the Russians, aero engine manufacturing had been revived with considerable profit. But these achievements were not so much owed to Castiglioni as to BMW's General Manager, Franz Josef Popp. The “Castiglioni affair”, needless to say, had repercussions on the Russian business. The Russian commercial agency in Berlin became aware of the high 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 aero-engine free of charge. In the aftermath, BMW tried desperately to win new contracts from the Soviets, but this was unfortunately not to be. And so 1931 marked the end of this lucrative Russian deal for BMW.

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 indeed he succeeded in doing through the license agreement with Czechoslovakia and various other deals. The long-term future of BMW was secured by the efforts of its employees and senior management at that time. It was, in particular, the capable chief executive Franz Josef Popp and the gifted chief designer Max Friz whose commitment to BMW established the company as a permanent international player in the building of aero-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 aero-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, the R 32. The R 32 was the first in a series of products that would prove successful and profitable over the following years and decades. This meant that by 1923 everything was set fair for a successful future.

R32 motorcycle

At the German Motor Show in Berlin (September 28ndash October 7, 1923) BMW exhibited the R32 to the public for thefirst 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.


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. By 1933 BMW was producing cars that could be called truly theirs, offering steadily more advanced I6 sports and saloons (sedans). The pre-war cars culminated in the 327 coupé and convertible, the 328 roadster, fast 2.0 L cars, both very advanced for their time, as well as the upscale 335 luxury sedan.

World War II

The German invasion of Poland and the associated commencement of hostilities meant that the government ordered production in parts of the German economy to be converted to the manufacture of armaments. Josef Popp was skeptical against shifting the focus of production to aero engine production. Popp's thinking that this would provide a one sided orientation for the group by focusing its activities on armament in preparation for war. Although this area was financially lucrative, it would mean that the group was heavily dependent on decisions made by the National Socialist 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”. [D. Kiley (2004)Driven: Inside BMW, the Most Admired Car Company in the World;John Wiley and Sons ;ISBN 0-471-26920-4] The strategically important position of BMW for air armament would lead to a rise in the volume of specifications and more interference from political and military agencies, which would in turn increasingly restrict the scope for entrepreneurial maneuvers. This would weaken the position of the group’s management. It would also erode the position of Franz Josef Popp, who up until then had directed the company largely autonomously and autocratically.

BMW primarily had to concentrate on the development and production of air-cooled aero engines. These activities were bundled within BMW Flugmotorenbau GmbH. Motorcycle production located at BMW AG in Munich had to abandon civilian production by 1940. The company was eventually only producing the R12 and from 1941 the R75, which was supplied to the "Wehrmacht". At the beginning of 1942, a government order demanded that all motorcycle production should be transferred to Eisenach, so that the main plant in Munich could be used for engine construction. A short time later in 1942, BMW was forced to abandon motorcycle production altogether.

A wide range of aero engines were produced for the Luftwaffe, including one of the most powerful available- the BMW 801. Over 30,000 different aero engines were manufactured up to 1945. BMW also researched jet engines, producing the BMW 003, and rocket-based weapons.

BMW AG had already had to give up its automobile manufacturing operations with effect from 1940, because the company was not producing any cars for the army. As a result, only repairs were carried out in this area, some engines were manufactured and a development department was maintained.

The executive body statutes were introduced on October 1, 1940, under which all subsidiaries had to transfer all their profits and losses in full to their relevant parent company and ultimately to BMW AG. Expansion of business in the aero engine sector and the legal framework conditions required several injections of capital. The majority of these funds were transferred immediately to Flugmotorenbau GmbH. The total capital of BMW AG increased in stages to RM 100 million by 1944. From January 1, 1944, further restructuring was carried out within the Group: 1) All sales were now effected through BMW AG, the GmbHs only acted as property companies. 2) Production was organized into 4 works groups operating independently of the legal structure of the Group (Munich, Allach, Eisenach and Berlin).

Foreigners were also employed from mid-1941, in order to make up for the lack of workers and to maintain production. Foreigners were used at all sites and by 1944, they generally made up between 40% and 50% of the workforce at BMW, which numbered over 50,000 at that time. The legal status of foreign workers ranged from prisoners of war to forced labor.

BMW used forced slave labor primarily from concentration camps between 1941 and 1945.

At the end of the war, the plants of BMW AG were confiscated by Allied troops. The production of armaments at the company was of course brought to an end.

econd crisis for BMW AGndash WWII aftermath

BMW AG was heavily bombed towards the end of the war, reducing most of the companies production facilities to rubble. In fact, by the end of the war, the Munich plant was completely destroyed.Cite web|url=http://www.drivingtoday.com/wbz4/greatest_cars/bmw2002/index.html|title=BMW 2002|accessdate=2007-06-22|work=drivingtoday.com] 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. Cite web|url=http://www.bmwworld.com/bmw/history/40s.htm|title=BMW History 1940's Timeline of Events|accessdate=2007-06-22|work=bmwworld.com]

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.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 AGndash a company for sale

In 1959 BMW's management suggested selling the whole concern to Daimler-Benz. Major shareholder, Herbert Quandt was close to agreeing such a deal, but changed his mind at the last minute because of opposition from the workforce and trade unions and advice from the board chairman, Kurt Golda. Instead Quandt increased his share in BMW to 50% against the advice of his bankers, and he was instrumental in turning the company around.

That same year, BMW launched the 700, a small car with an air-cooled, rear-mounted 697 cc boxer engine from the R67 motorcycle. Its bodywork was designed by Giovanni Michelotti and the 2+2 model had a sporty look. There was also a more powerful RS model for racing. Competition successes in the 700 began to secure BMW's reputation for sports sedans.

At the Frankfurt Motor Show in 1961, BMW launched the 1500, a powerful 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.

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 were called the '02' series—the 2002 being the most famous—and began the bloodline that later developed into 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.

Expansion- Hans Glas GmbH

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.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 Class sedans, with a body styled by Bertone. The new class coupes were replaced by the 3 Series in 1975, and the New Six 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.


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. [ [http://ftvdb.bfi.org.uk/sift/series/27081 BFI | Film & TV Database | WHEN ROVER MET BMW ] ]

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 has yet to release any Rover-badged cars, 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". Bangle, commonly mistakenly accused to have penned all of the designs himself, only chose which design was to be used. 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.

Many aspects of the "controversial" designs are now beginning to surface in other auto manufacturer's designs, most notably Toyota and Honda. 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.

What is not as well known, however, is that 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. 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 [cite book|url=http://books.google.com.au/books?id=PfOcUn9GCc4C|title=Ports, Cities, and Global Supply Chains|author=James Jixian Wang, James Wang, Daniel Olivier, Theo Notteboom, Brian Slack|date=2007|isbn=0754670546|accessdate=2008-08-24|publisher=Ashgate Publishing Ltd] . The wholly-owned subsidiary now exports over 70% of its output. In the mid-1990s, BMW invested R1bn to make Rosslyn a world-class facility. The plant now exports over 50,000 3 Series cars a yearFact|date=August 2008, 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, the BMW Z4 Roadster and Coupe, and the BMW Z4 M Roadster and Coupe. The oft-rumored crossover vehicle, the X6, and the formerly Euro-produced X3 were recently confirmed by the Chairman of BMW's board as being under development for production at Plant Spartanburg.

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.

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 500 vehicles daily. Recently, the plant has undergone a major renovation switching from 2 production lines down to one. Now both the X5 and the Z4 are produced in the same line, one right after the other.

BMW signed agreement in 1999 with Avtotor to produce cars in Kaliningrad, Russia. Factory has been assembling 3 and 5 -series cars. [ [http://newsfromrussia.com/main/2004/03/29/53072.html Production of new BMW 5 series begins in Kaliningrad - Pravda.Ru ] ]

Starting from October 2004, BMWs intended for the Chinese market are produced in Shenyang, China.Cite web|url=http://english.people.com.cn/200405/21/eng20040521_144003.html|title=BMW launches new plant in Shenyang|accessdate=2007-06-22|work=english.people.com.cn] 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 has been 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. [ [http://www.bmwcca.org/node/8278 BMW increasing Spartanburg production to 200,000 yearly | BMW Car Club of America ] ]

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. [ [http://news.bbc.co.uk/2/hi/business/6505987.stm BBC News - BMW unveils India assembly plant] ] [ [http://www.greatcarstv.com/index.php/content/view/74/247/ BMW opens new plant in Chennai, India] ] The new factory may also be used to help boost the production of BMW’s super-successful MINI. [ [http://germancarscene.com/category/mini/ MINI could be built in India] ] BMW India headquarters is located in Gurgaon outside Delhi.

The BMW Group is considering the establishment of a new plant which will be located either in Volos, Greece or Limasol, Cyprus. These plants will be manufacturing motorcycles as well as the BMW 1 Series and the BMW 3 Series and will be serving the markets of Eastern Europe and Middle East. Construction is rumored to begin in 2009.


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.

ee also



Further reading

*cite book|url=http://books.google.com.au/books?id=i-ZuAQAACAAJ|title=The History of BMW|author=Halwart Schrader, Automobile Quarterly Editors|publisher=Dutton Books|date=1985|isbn=0525125221
*cite book|url=http://books.google.com.au/books?id=5e1aJgAACAAJ|title=Bmw: A History|author=Halwart Schrader, Ron Wakefield|publisher=Motorbooks Intl|date=1979|isbn=0915038153

External links

* [http://www.bmw-grouparchives.com BMW Group archives]

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