Bayerische Motoren Werke A.G.

BMW Haus, Petuelring 130
Postfach 40 02 40
Federal Republic of Germany
(89) 38951

Public Company
Incorporated: 1917
Employees: 54,000
Sales: DM 15.6 billion (US$8.065 billion)
Market Value: DM 8.719 billion (US$4.490 billion)
Stock Index: Vienna Berlin Stuttgart Bremen
Düsseldorf Frankfurt Hamburg Hanover Munich

Bayerische Motoren has not always been known as a car maker. It was originally an aircraft engine manufacturer and is also a major producer of motorcycles. In terms of annual car production, the 71-year old firm is rated sixteenth worldwide. But overall, BMW is the seventh largest automobile company, and its growth rate in the late 1980’s is more vigorous than most of its competitors.

Although not officially established until 1917, BMW can trace its heritage back to 1913 when Karl Rapp started to build aircraft engines for Austria in anticipation of World War I. Rapp-Motorenwerke’s top customer was Franz Josef Popp, general inspector of Emperor Franz Josefs army. Popp hired Max Friz, an aircraft engine designer from Austro-Daimler; together in Munich they established Bayerische Werke based on the engineering ideas of Rapp.

Popp, an engineer, took charge of administration while Friz served as senior designer. A third associate, Camillo Castiglioni from Vienna, looked after the accounts. The trio began their enterprise at the old Rapp factory, then moved to the Moosacher Strasse factory, also in Munich, in 1918. There Friz designed and built the company’s first aircraft engine.

At the end of the war, Bayerische Motoren turned to the production of train brakes, and when in 1922 the Moosacher Strasse factory was sold to Knorr-Bremse, BMW employees moved to another Munich location, the former Ottowerke plant on the Lerchenauer Strasse. (Ottowerke had been founded by Gustav Otto, son of Nikolaus August Otto, inventor of the four-stroke internal combustion engine.)

Despite the 1923 Treaty of Versailles’ ban on aircraft production in Germany, Bayerische Motoren continued to operate and thrive. Their 12-cylinder engines were used on international flights by ace pilots such as Lpuschow, Gronau, and Mittelholzer, and more than a thousand BMW VI engines were sold to the Soviet Union. Production continued to rise steadily through the 1930’s.

The company’s interests in motorcycle manufacture developed rapidly in the early 1920’s. The first model, the R32, consisted of a flat twin engine and drive shaft housed in a double-tube frame, with valves in an inverted arrangement to keep the oil clean. Ernst Henne, riding an R32, broke the world motorcycle speed record at 279.5 kph (173.35 mph) in 1929; his record held until 1937.

In 1928 Bayerische Motoren acquired the ailing Fahrzeugwerke Eisenach, and a year later the Dixi, BMW’s first luxury car, was produced at the Eisenach site. The Dixi won the 1929 International Alpine Rally, covering the mountain route in five days. But despite its success, the Dixi created major financial problems for BMW, and a merger with Daimler-Benz was discussed in detail. Meanwhile, a partnership contract was agreed; Dr. Wilhelm Kissel, Daimler-Benz’s chairman, and Popp, at Bayerische Motoren, joined each other’s supervisory boards. However, a smaller 6-cylinder model of the Dixi proved to be a most effective competitor in the Daimler-Benz market, and Popp dropped the merger plans.

Another Dixi, the DA2, based on the 6-cylinder model, was introduced in Berlin in July 1929. It featured improved handling, better brakes, and a more attractive interior. Despite the stock market crash in October 1929 and the subsequent depression (17,000 German firms were forced into bankruptcy, including one of Bayerische Motoren’s shareholders, the Danat-Bank) the company avoided financial disaster. 5,390 DA2’s, the “mini car at a mini price,” were sold in 1929; this was increased the following year to 6,792 cars.

When Hitler assumed power in 1933, Bayerische Motoren, along with other German automotive companies, was required to manufacture airplane engines for the new air force (Luftwaffe). In the same year, BMW acquired licenses to produce the 525 bhp Hornet engine and to develop small radial engines for sports planes. The company also launched its 300 automobile series with the 303, the first car to feature the long-familiar “kidney” shape. Lighter than comparable models, the 303 was 50% more powerful. Its success encouraged BMW to introduce two popular compact sports models, the 315 and the 319. Early in 1936, the 326 model was launched in both sedan and convertible versions. The all-steel bodied 327 was also introduced that year, and in September Popp unveiled the standard-production 328, which proved to be the fastest sports car of its time; it won the Italian Mille Miglia race in 1938.

The company’s rising production of aircraft engines and armored motorcycles resulted in an expansion of facilities at the Milbertshofen plant on the Lerchenauer Strasse which had previously been devoted to motorcycle manufacturing. A 1939 edict of the German Ministry of Aviation required Brandenburgische Motorenwerke to merge with Bayerische Motoren, and a new factory, Allach, was constructed with government money. The Allach buildings, tucked away in woods near Munich, were constructed at a distance from one another to minimize damage in the event of an air raid.

BMW played an important role in the German war effort and at the height of Nazi domination the company operated plants as far afield as Vienna and Paris. In two crucial areas of military technology, BMW was in the vanguard: with the guidance of Dr. Hermann Oestrich of the German aviation test center, the company developed the 003, the first jet engine to enter standard production; and under conditions of intense secrecy, it opened a rocket testing and production plant at Zuhlsdorf.

Intent on maintaining a plentiful supply of military aircraft, the Nazi government instructed Bayerische Motoren in 1941 to halt all motor car production. Popp, who had been at the company helm for 25 years, refused. He was forced to resign and narrowly avoided internment in a concentration camp. It was left to his successor, Fritz Hille, to institute Bayerische Motoren’s automatic system of monitoring production—a mechanical forerunner of the computer.

After the defeat of the Nazis, Allied Command ordered the dismantling of many BMW facilities; at the same time, reconstruction of the now-divided Germany got underway. In the immediate post-war years, few West Germans were in a position to buy cars, but by 1948, the year of German currency reform, there was a substantial need for motorcycles. BMW produced a new model out of spare parts provided by dealers. Known as the R24, this motorcycle was put into production and in 1949 almost 10,000 machines came off the assembly line. 1950’s production increased to 17,000, 18 percent of which were exported.

Bayerische Motoren’s return to car manufacturing in 1951 proved to be a disappointment. The 501 model, a 6-cylinder conservatively styled car with few technical innovations, was not well-received; neither was its successor, the 502, which featured a V8 engine. The company pinned its hopes on the 503 and 507 models, highlights of the 1955 Frankfurt Motor Show. Both cars were designed by Albrecht Graf Goertz and were powered by Alex von Falkenhausen engines. However, they proved to be too expensive for the majority of West German motorists. To add to BMW’s woes, their motorcycle sales dropped drastically and the Allach factory had to be sold.

The company’s fortunes revived a little in the late 1950’s during the era of the “bubble car.” Their Isetta mini-car, a mere 2.29 meters (7.51 feet) in length and fitted with motorcycle engines, reached a speed of 53 mph. Customer interest in the machine was short-lived, but it enabled BMW to recoup some of its recent losses.

To capitalize on the increasing market for cars—albeit inexpensive ones—Bayerische Motoren introduced the rear-engined 700 LS model in August 1959. Available as a coupe or convertible, and powered by motorcycle engines, the 700 LS was initially unprofitable. By 1965, however, when annual sales reached 18,000 units, the car had become the company’s first long-term success of the postwar years.

BMW’s fortunes further improved with the launching of their 1500 model. Indeed, this first “sports sedan” secured the company’s prominence in the automotive market for the foreseeable future. The balance sheet showed a profit of DM 3.82 million in 1963 and a 6 percent dividend was paid. By the end of the decade, the company’s long-suffering shareholders were much happier. Nine more models had been introduced, sales for 1969 set a new record of 144,788 cars, and turnover was up to DM 1.4 billion.

The 1970’s, a period of dramatic growth in Western Europe, proved to be a time of significant reorganization and development at BMW. All motorcycle production was moved to West Berlin, a new plant was opened, the popular 520 sports sedan was launched (1972), the Dingolfing plant in Lower Bavaria was further expanded (providing jobs for 15,000 farmworkers), and following the establishment of the European Economic Community, BMW subsidiaries were set up in member countries. Halfway through the decade, a United States importing, marketing, distribution, and support subsidiary was formed in Montvale, New Jersey, and later in the 1970’s the company built a car plant at Steyr in Austria.

It had appeared early in the 1970’s that Bayerische Motoren’s interests in motor racing, operated by BMW Motorsport GmbH, might be curtailed; in fact, the company was able to expand its racing activities. For some years, BMW had been the leading producer of racing car engines in the classification known as Formula 2; the company now decided to compete in the Formula 1 market as well. Success was swift. In 1975 Nelson Piquet won the Formula 1 World Championship in a BMW-powered Brabham. This was the first turbo-charged engine to win in the 34-year history of Formula 1 racing.

The Steyr plant in Austria commenced operation in the early 1980’s as a producer of turbo-charged diesel engines. Now, the factory is a major petrol engine manufacturer and at full capacity can turn out 150,000 engines a year. Another factory, at Spandau in West Berlin, opened in the spring of 1984 to make BMW’s new four-cylinder, water-cooled K series of motorcycles. This machine won the January 1985 Paris-Dakar Rally, the world’s toughest and longest off-road race. The company’s motorcycles won this rally four times in its first six years.

BMW’s car sales in the last couple of decades have increased along with the demand for higher-priced models, and healthy domestic sales have been enhanced by the successes of foreign subsidiaries. In 1984, for example, BMW of North America sold 71,000 cars. On the other hand, motorcycle sales have suffered. High unemployment, high interest rates, and loan restrictions have decreased the purchasing power of a crucial motorcycle market—young Europeans; and competition from Japan has been fierce.

BMW Group’s present chairman, Eberhard von Kuen-heim, has ably survived the industry’s ups and downs and is frequently cited as one of West Germany’s most astute businessmen. Director Paul Hahnemann, hired as part of the new management team in 1961, is now in charge of both production and sales. He has been instrumental in the development of the company’s “New Class” line. BMW is hopeful that these middle price-range cars, emphasizing speed, styling, and luxury, will be widely popular among young executives.

Principal Subsidiaries

BMW Motorrad GmbH; BMW Holding Corp. (USA); BMW of North America Inc. (USA); BMW Leasing; BMW Marine GmbH; BMW Machinenfabrik Spandau GmbH; BMW Motorsport GmbH; Bavaria Wirtschaftsagentur GmbH; Bavaria-Lloyd Reiseburo GmbH (51%); Schorsch Meier GmbH. The company also has subsidiaries in the following countries: Australia, Belgium, Canada, Curacao, England, Italy, Japan, The Netherlands, New Zealand, South Africa, Spain, and Switzerland.