Bayerische Motoren Werke AG

views updated May 14 2018

Bayerische Motoren Werke AG

Petuelring 130, BMW Haus, D-8000
Munich 40
Germany
(089) 3895-0
Fax: 38 95.8858

Public Company
Incorporated: 1917
Employees: 71,034
Sales: DM29.01 billion
Stock Exchanges: Vienna Berlin Stuttgart Bremen Düsseldorf
Frankfurt Hamburg Hanover Munich
SICs: 3711 Motor Vehicles & Car Bodies; 5012 Automobiles
& Other Motor Vehicles; 3751 Motorcycles, Bicycles &
Parts

Bayerische Motoren Werke AG, popularly known as BMW, is a global manufacturer and marketer of luxury automobiles. However, the company was not always known as a car maker. It was originally an aircraft engine manufacturer and was also a major producer of motorcycles. Competing in the luxury car and motorcycle market, BMW enjoyed vigorous sales during the 1980s, but faced a host of problems during the 1990s, as conditions in the European automobile industry and manufacturing problems peculiar to Germany threatened to diminish the company’s once-stalwart position. In 1994, BMW purchased Rover Group Ltd., a British manufacturer of luxury sport-utility vehicles, which substantially improved the company’s chances for a return to the profitable 1980s and the likelihood of a robust twenty-first century.

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 Mittel-holzer, and more than a thousand BMW VI engines were sold to the Soviet Union. Production continued to rise steadily through the 1930s.

The company’s interests in motorcycle manufacture developed rapidly in the early 1920s. 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 Fahrzeug-werke 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 chairperson, 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 DA2s, 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, the 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 percent 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 Branden-burgische 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 postwar 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 1950s 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 1970s, 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 U.S. importing, marketing, distribution, and support subsidiary was formed in Montvale, New Jersey, and later in the 1970s the company built a car plant at Steyr in Austria.

Early in the 1970s, it appeared that Bayerische Motoren’s interests in motor racing, operated by BMW Motorsport GmbH, might be curtailed; in fact, however, 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 1980s as a producer of turbo-charged diesel engines. By the mid-1980s, the factory was a major petrol engine manufacturer and at full capacity could 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 during the 1970s and 1980s increased along with the demand for higher-priced models, and healthy domestic sales were 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 suffered. High unemployment, high interest rates, and loan restrictions decreased the purchasing power of a crucial motorcycle market—young Europeans; and competition from Japan became fierce.

As the company entered the 1990s, competition from Japanese car manufacturers represented perhaps the greatest threat to BMW’s future growth, although high German labor costs continued to be a perennial problem. Adopting design characteristics from European luxury models, the Japanese produced cars of similar quality, yet sold the cars at substantially lower prices than those offered by European manufacturers, including BMW. Exacerbating BMW’s woes, economic conditions in Europe soured during the early 1990s, portending dismal financial results for the coming years. However, despite these ominous developments, BMW entered the decade in sound shape. BMW exhibited a vitality few other European car manufacturers could muster, thanks to robust sales during the 1980s and comparatively small debt. In this regard, BMW was the exception rather than the norm in a troubled European automobile industry. However, the 1990s promised to be a much different decade than the 1980s, when luxury items and luxury cars sold extremely well, and as the company charted its future it braced itself for less profitable times.

As the recession increased its intensity, BMW’s financial performance suffered, but not to the extent that other European manufacturers exhibited. The most glaring decline in the company’s growth took place at its U.S. operations, where the Japanese struck their first blow in the luxury car market, and the German mark’s strength against the dollar slowed sales and squeezed profit margins. By 1992, BMW of North America was recording a 50 percent decline in sales from the subsidiary’s peak years in the mid-1980s. BMW management regarded the American situation as boding ill for its European operations. To strengthen its position in the United States, the company announced plans that year to construct an approximately $300 million assembly plant near Spartanburg, South Carolina, which, through the plant’s state-of-the-art equipment, was designed to produce 72,000 cars a year. Half of this annual production volume the company planned to export overseas, which lessened BMW’s dependence on its domestic production facilities and the associated high labor costs of German workers.

In 1993, von Kuenheim ended his 23-year reign at BMW and was replaced by Bernd Pischetsrieder, who had spent his entire career at BMW. Under Pischetsrieder’s stewardship, BMW concluded a momentous acquisition that promised to dramatically change the company’s future and bolster its position worldwide. In January 1994, less than a year after gaining control of BMW, Pischetsrieder announced the acquisition by BMW of Rover Group Ltd., the esteemed British manufacturer of sport-utility vehicles. The purchase, a $1.2 billion deal, immediately doubled BMW’s share of the European market to 6.4 percent and gave the company a prestigious presence in the sport-utility market, which was growing exponentially during the early 1990s. The purchase of Rover Group stunned the industry, particularly Honda Motor Company, which held the remaining 20 percent interest in the British car manufacturer and did not learn of BMW’s purchase until three days before Pischetsrieder’s announcement.

BMW’s prospects after the acquisition of Rover Group were exceedingly and justifiably brighter. The merger brought together two of the few car manufacturers to generate profit in 1993 and gave BMW a much more diverse product line to match against the company’s mounting competition. The most pressing task for BMW during the mid-1990s involved the consolidation of Rover Group into the company’s existing corporate and manufacturing structure, the successful completion of which augured a more profitable future.

Principal Subsidiaries

BMW Ingenieur-Zentrum GmbH; BMW Rolls-Royce GmbH (50.5%); BMW Bank GmbH; BMW Maschinenfabrik Spandau GmbH; KONTRON GmbH; BMW Leasing GmbH; BMW Motorrad GmbH; BMW Fahrzeugtech-nik GmbH; BMW INTEC Beteiligungs GmbH; BMW M GmbH; KONTRON Elektronik GmbH; BMW Motoren Gesell-schaft m.b.H. (Austria); BMW Coordination Center N.V. (Belgium); BMW France S.A.; BMW (South Africa) (Pty) Ltd.; BMW Finance N.V. (Netherlands); BMW Austria Gesellschaft m.b.H.; BMW Overseas Enterprises N.V. (Curacao); BMW Holding AG (Switzerland); BMW (Schweiz) AG (Switzerland); BMW Holding AG (Switzerland); BMW Japan Corp.; BMW Holding Corporation (USA); BMW Ltd. (Great Britain); BMW Italia S.p.A.; BMW Ibérica S.A. (Spain); BMW Australia Ltd.; BMW Belgium S.A.; BMW Canada Inc.; BMW Neder-land B.V.; BMW Sverige AB (Sweden); BMW New Zealand Ltd.

Bayerische Motoren Werke AG

views updated Jun 11 2018

Bayerische Motoren Werke AG

COUNTERFEIT CAMPAIGN
MINI ROBOTS CAMPAIGN
THE HIRE CAMPAIGN

Petuelring 130
Munich, D-80788
Germany
Telephone: 49 8938224272
Fax: 49 8938224418
E-mail: [email protected]
Web site: www.bmwgroup.com

COUNTERFEIT CAMPAIGN

OVERVIEW

After the United States mandated collapsible steering wheels in 1967, the British Mini Cooper retreated back to the United Kingdom and was not sold stateside for 35 years. Reintroduced in 2002 after being purchased and then reengineered by Bayerische Motoren-Werke AG (BMW), the MINI Cooper, as it was later capitalized, began a long series of unorthodox advertising campaigns. Whether it was being strapped to the roofs of SUVs or parked in the bleachers of sports venues, the car rapidly gained traction within the premium-small-car sector. While Volkswagen AG's New Beetle and DaimlerChrysler AG's PT Cruiser sales suffered in 2005, the MINI Cooper flourished under the brand's "Let's Motor" tagline. Hoping to not only to entertain consumers but also to immerse them deeper within the MINI Cooper brand, BMW released its "Counterfeit" campaign on February 14, 2005.

With an estimated budget of $25 million, the advertising agency Crispin Porter + Bogusky launched "Counterfeit" across television, DVD, Internet, and print mediums. Airing only on cable networks, the campaign's one TV commercial warned viewers of fictional counterfeiters who were supposedly selling counterfeit MINI Coopers on the black market. The commercial directed viewers to www.CounterfeitMini.org, a website created by the Counter Counterfeit Commission (CCC), an equally fictional watchdog organization that educated consumers about MINI Cooper counterfeits. If website visitors wanted to learn more, they could order a DVD containing the 10-minute spoof "Counterfeit MINI Cooper," which absurdly documented con artists converting junk cars into look-alike MINI Coopers.

For March 2005, MINI Cooper posted its highest sales month ever and surpassed the previous March by 44 percent. At the Cannes International Advertising Festival in 2005 the campaign garnered a Gold Lion as well as the only American-won Titanium Lion. The ceremony awarded four Titanium Lions to work that the judges considered to be innovative and that utilized several mediums.

HISTORICAL CONTEXT

Even though the British Mini Cooper was an extremely popular car throughout the United Kingdom, its American stint ended in 1967 after collapsible steering wheels were required on every new car sold. Sales of the Mini increasingly dropped after its 1960s heyday. Eventually the Mini brand and other British automobiles were managed by the Rover Group, which was purchased by BMW in 1994. At first BMW was unsure of how to reintroduce the tiny car to the United States. Even after engineers modernized the interior, upgraded the car with a 115-hp Chrysler engine, and increased the length by 20 inches, it was still the smallest car in the U.S. market. By 2001 consumer trends, including the burgeoning markets for SUVs and full-size trucks, suggested a daunting forecast for the MINI Cooper. "If we'd listened to the market research, we'd have never done the MINI Cooper," Jack Pitney, general manager of Mini USA, admitted to the Cleveland Plain Dealer.

In 2002 Crispin Porter + Bogusky released what was the first of many innovative advertisements for the MINI Cooper. To promote the car's recreational qualities, MINI Coopers were welded onto the roofs of SUVs and driven cross-country. Crispin Porter + Bogusky parked MINI Coopers in the seating sections of sporting arenas. Supermarket tabloids warned about "mutant bat boy in MINI Cooper." Playboy magazine allowed a MINI Cooper to be featured as a centerfold in 2002. Worldwide sales for the MINI Cooper S skyrocketed 46 percent in 2003. As part of the "MINI Robots" campaign, in 2004 a booklet was inserted into consumer magazines such as Motor Trend, National Geographic, and Rolling Stone. The booklets were written by the fictional Roland Samuel, a journalist validating stories about robots made from MINI Cooper parts that prevented traffic accidents in Oxford, England.

Hoping to continue its string of innovative campaigns, creatives at Crispin Porter + Bogusky wanted to create a 2005 campaign with a "call to action," or advertising that motivated consumers to look someplace else for brand information. The ad agency reasoned that the more time a consumer invested with a brand, the more likely it was that he or she would tell others about it.

TARGET MARKET

"Counterfeit" targeted men 18 to 34 years old. The campaign's 60-second commercial did not air on network television, where advertising cost more, but rather across cable channels popular with men, such as ESPN, MTV, and Spike TV. "Cable offers many more opportunities than the broadcast TV networks, at lower prices," Jim Poh, media director of Crispin Porter + Bogusky, told Automotive News. "Cable is going to be a more effective use of your dollars. In a nutshell, the viewers of these channels have the MINI mindset."

One requirement for the "MINI mindset" was a sense of humor. The campaign's TV commercial, along with the website to which it directed viewers, www.CounterfeitMINI.org, facetiously showed junk cars painted to resemble MINI Coopers. "Mini customers appreciate the joke. They are a group that doesn't like being hit in the face with traditional advertising," Pitney told the Wall Street Journal. "They are very much into discovery. They like to come upon something in an interesting way and learn about it on their own terms."

COMPETITION

Volkswagen's Golf GTI and New Beetle were considered "premium small cars," the classification of high-quality, high-priced, petite cars like the MINI Cooper. To promote the 2005 Golf GTI, the ad agency DDB created a television spot that used computers to juxtapose actor Gene Kelly's face onto the body of a break-dancer. At the spot's beginning it appeared that Kelly was standing on the rainy street corner from his 1952 movie Singin' in the Rain. After a few notes from the movie's title song, the music escalated into an electronic-music rendition of "Singin' in the Rain" while Kelly began break-dancing. At the commercial's finale he appeared next to a parked Golf GTI.

Explaining why DDB used Kelly's likeness for the spot, Martin Loraine, the creative director at the agency, told the New Zealand Herald, "We looked for things which were icons. We thought about the Golf GTI when it came out. There are not many cars that invent a genre, which is what we thought was the most prominent thing about the GTI. It wasn't just a fast car or a nice car, it was an original, which is rare."

Starting in 1998 Arnold Worldwide advertised Volkswagen's New Beetle with its "Drivers Wanted" campaign. Television spots initially targeted nostalgic baby boomers with copy declaring "Less Flower. More Power" or "If you sold your soul in the '80s, here's your chance to buy it back." At first the New Beetle's popularity skyrocketed. More than 64,000 units were sold during its first year. By 2003, however, New Beetle sales began waning; critics referenced Volkswagen's problems to the quick boom-and-bust cycle that had haunted Chrysler's PT Cruiser after its 2000 release. In 2005 Volkswagen ended its contract with Arnold Worldwide and awarded its $400 million advertising account to Crispin Porter + Bogusky.

MARKETING STRATEGY

The "Counterfeit" campaign displayed MINI Cooper's signature characteristics, such as the car's colorful graphics and performance capabilities, in a way that "entertains and engages people," Alex Bogusky, Crispin Porter + Bogusky's principal, told Adweek. "You can't just push things into enough eyeballs anymore," he said. "It has to be so much fun that it's worth their time, that you've entertained them and taught them about the product at the same time."

On February 14, 2005, a 60-second commercial began appearing across cable channels such as Spike TV, Speed Channel, Sci-Fi Channel, and Outdoor Life Network. The spot posed as a public-service announcement from the fictional Counter Counterfeit Commission (CCC). The CCC was supposedly alerting the public about a recent outbreak of counterfeit MINI Coopers. The spot first explained the counterfeiting of luxury watches, sunglasses, and most recently, MINI Coopers. Footage showed high-end watch and sunglass knockoffs in Brazil's Rio de Janeiro flea markets, followed by a dilapidated car that was decaled with racing stripes. The spot then announced the availability of a 10-minute DVD that educated consumers about fake MINI Coopers and included testimonials from previously defrauded consumers. A man with his face obscured and voice altered admitted, "I bought a MINI for $1,200 bucks. 'Let's Motor,' right?" To which the voice-over answered, "Wrong!" The commercial continued with additional humorous footage of counterfeit MINI Coopers, followed by beautiful images of the real thing. The commercial ended with voice-over explaining, "To order Counterfeit MINIs, visit CounterfeitMINI.org or send a self-addressed-stamped-envelop to the Counter Counterfeit Commission."

The DVD, which sold for $19.95, provided more tongue-in-cheek information about counterfeit MINI Coopers. Besides the campaign's main website, www.CounterfeitMini.org, which provided detailed informational about counterfeit and authentic MINI Coopers, another website was created that supposedly auctioned counterfeit MINI Coopers. Conveniently, the auctions had all been closed. Bryan Buckley directed the campaign's filming in Rio de Janeiro. The footage was later edited to compose the 60-second television spot, the DVD, and the additional footage that was posted on the website. Collectively, it offered "an hour's entertainment, maybe, and that's a good trade for your time and your attention," Bogusky told the Wall Street Journal. To further validate the CCC's warnings, a pop-up message on www.MINIUSA.com directed consumers to call the CCC hotline if counterfeit MINI Coopers were spotted. Fictional brochures were also inserted in consumer magazines to warn about counterfeit MINI Coopers.

One of the campaign's challenges was its limited $25 million budget. To compete against Volkswagen, which spent an estimated $400 million on advertising in 2005, Crispin Porter + Bogusky devised a campaign outside of traditional formats. "Given that there is not a lot of difference among products in any given category, advertising is the differentiator," Chuck Porter, chairman of Crispin Porter + Bogusky, told Television Week. "We believe that making a brand a part of pop culture [is more effective]."

Some analysts criticized the campaign's deceptive quality, which could leave its target audience feeling betrayed. Also, for consumers to experience the full breadth of the campaign, they needed to visit the website, an extra step that complicated the campaign's message. Many advertising agencies, fearful of the strategy's overall risk, avoided such "call to action" campaigns. Tim Mellors, who had executed "call to action" campaigns as chief creative officer of WPP Group's Grey Worldwide North America, explained the benefit of this strategy to the Wall Street Journal: "You know perfectly well that most people won't bother, but when you get it right, it's another stage of involvement that's never been there in the past."

TOUGH LOVE

For the MINI Cooper "Counterfeit" campaign the advertising agency Crispin Porter + Bogusky created a spoof website titled www.CounterfeitMini.org. The site supposedly warned consumers about counterfeit MINI Coopers flooding the car market. In one section of the website, titled "TOUGH LOVE," a visitor could use his or her mouse to slap a counterfeit MINI Cooper owner who had supposedly bought an antique car, fashioned with MINI Cooper fog lamps and racing stripes, thinking it was a MINI Cooper.

OUTCOME

The "Counterfeit" campaign yielded success soon after its launch. In March 2005 MINI Cooper recorded its highest monthly sales posting ever and surpassed the previous March's earnings by 44 percent. Fairing well at award shows, the campaign won a Gold Lion Award at the Cannes International Advertising Festival in 2005 and also received a Titanium Lion. The latter was given to the four campaigns considered most effective at using multiple mediums. "Counterfeit" was the only American campaign to win a Titanium Lion in 2005.

Crispin Porter + Bogusky also noticed a surge of chatter in automotive blogs and MINI Cooper chat rooms regarding the "Counterfeit" ads. Alex Bogusky, serving as a guest writer for Advertising Age's Creativity, stated, "I'm very happy to see the MINI 'Counterfeit' work getting recognized. It was a massive undertaking and a labor of joy for so many people at the agency, and it's the kind of work that gives us personally the greatest joy because the interaction with consumers, from the TV to the web, is so fun to watch. You actually get to see and read e-mails and blog entries from people who are being persuaded and entertained by MINI and the MINI brand. The relationship between brand and consumer is created so transparently and quickly, it's almost like creating advertising live on stage."

MINI ROBOTS CAMPAIGN

OVERVIEW

In 1967 a safety mandate forced the antiquated, cheaply made British Mini Cooper to discontinue sales in the United States. In 1994, when Bayerische Motoren Werke AG (BMW) attained control of the Mini Cooper brand, executives were perplexed about how to reintroduce their newly acquired microcar to the United States. Finally reappearing in the United States in 2002, followed by a prolific magazine, Web-based, and outdoor campaign, the MINI, as it had come to be spelled, was a screaming success. By 2004 MINI made up 11 percent of BMW's sales. Company executives were nervous, however, about the boom-and-bust pitfalls that haunted other trendy cars, like the New Beetle and PT Cruiser. It was for this reason that "MINI Robots," formulated as a "viral" campaign, a term referring to advertising that relies on word-of-mouth contagiousness, was launched in March 2004.

With an estimated budget of $15 million, "MINI Robots" was developed by Miami-based ad agency Crispin Porter + Bogusky. First a site was developed on the Internet to herald a clandestine project that assembled robots from MINI parts. The project's mastermind, a fictional Dr. Mayhew, was a retired scientist who posted daily video clips of his experiments. Shortly afterward a second site was published, with sightings of robots slinking through the moonlit streets of Oxford, England, and preventing traffic accidents. Later Crispin Porter + Bogusky inserted a novelette, "Men of Metal," into consumer magazines like National Geographic, Rolling Stone, Men's Health, and Men's Journal. The 40-page insert chronicled a journalist's quest to find Dr. Mayhew and the people rescued by his robots. To perpetuate the joke, Crispin Porter + Bogusky created websites for Dr. Mayhew, along with a home page for Casson, the fictitious publishing company of "Men of Metal," and a personal site for the novelette's author.

According to an interview with Jack Pitney, vice president of MINI USA, in the Wall Street Journal, customers appreciated the joke: "They like to come upon something in an interesting way and learn about it on their own terms." One week after the appearance of "Men of Metal," more than 46 million hits were registered on the "MINI Robots" main website. Success reached BMW's bottom line as well. During the first year of "MINI Robots," 36,000 MINIS were sold, surpassing the 34,000 units sold the previous year. By the end of 2004 MINI orders were outstripping supply, with a six-month waiting list for cars with some of the newer features.

HISTORICAL CONTEXT

Prompted by the Suez fuel crisis, Sir Alec Issigonis designed the Mini in 1959 to be Britain's first "classless" car. Meager but efficient, the tiny Mini was sold in the United States for only seven years, until collapsible steering wheels were mandated in 1967. In 1994 BMW acquired the Rover Group, which included the Mini brand. The German automakers initially were unsure about how to reawaken interest in the car, especially in the United States. Even after engineers had modernized the interior, upgraded the MINI with a 115-hp Chrysler engine, and increased the length by 20 inches, it was still the smallest car in the U.S. market. By 2001 consumer trends, including the burgeoning markets for SUVs and full-size trucks, suggested a daunting forecast for the MINI. "If we'd listened to the market research, we'd have never done the MINI," Pitney admitted to the Cleveland Plain Dealer.

Crispin Porter + Bogusky oversaw the U.S. marketing launch for the MINI. At the start of 2002 the budget was a meager $15 million, with Crispin Porter + Bogusky introducing cost-effective magazine and outdoor advertisements that Brandweek called a series of "one-offs," individual ads that were not part of an integrated campaign. Playboy allowed MINI to "pose" for its June 2002 centerfold spread, complete with a list of likes and dislikes. "The end to a perfect day: A hand-washing with warm, sudsy water and a nice wax," the ad read. In 2003 MINI punch-out kits, which allowed people to construct their own paper models, could be found in consumer magazines. Ford Expeditions were driven across the United States with MINIs strapped to their roofs. "We have to be creative in our marketing and look for clever ways to have $1 seem like $2," Pitney told Autoweek. "Everything we do has to reflect the unique, fun, cheeky nature of the MINI brand in a holistic, 360-degree MINI way."

From 2001 to 2003 brand recognition for the MINI rose more than 400 percent in the United States. Despite consumers' inclination toward larger cars, MINI sales rose from 20,000 units in 2002 to more than 34,000 in 2003. Kerri Martin, manager for marketing communications at MINI USA, was quoted in the New York Times as saying, "We're constantly going left when everyone is going right." It was in this vein of unorthodox thinking that the "MINI Robots" campaign was created.

TARGET MARKET

MINI USA and Crispin Porter + Bogusky anticipated that "MINI Robots" would resonate with the 20- to 30-year-old demographic of mechanically minded males who were put off by women's praise of the car as "cute." This was also a group, as Pitney told the Wall Street Journal, that does not like "being hit in the face with traditional advertising."

In an interview with Shoot, Andrew Keller, a Crispin Porter + Bogusky creative director, said, "[Given] the nature of the car, its target audience is what I call a creative mindset. They are people that go to the Web, and believe the car is a means of self-expression—it is that sort of vibe. However, we had to zero in on a target at the beginning, and it is twenty- to thirty-year-old males." He added, "But that is more tactical than anything right now because ultimately, the MINI should be something that everybody wants. The queen drove one and a plumber can drive one, and that is what we want to maintain."

Although a variety of men's magazines featured the novelette "Men of Metal," the references to the story were placed on the Internet. Thus, passing over a lower-income audience, "MINI Robots" was aimed at a target market with access to a computer and an Internet connection.

THE ITALIAN JOB

BMW's MINI made cameo appearances in movies like Bourne Identity and Austin Powers, Goldmember, but the little car's biggest role was in the 2003 remake of The Italian Job. While British Motor Corporation had refused to supply cars for the 1969 version, with Michael Caine, BMW donated more than 30 MINIs for Paramount's remake.

COMPETITION

J.D. Power and Associates stated in 2002 that MINI USA had not only reintroduced the brand in the United States but also created a new automotive sector, the premium small car. Other critics found categorizing the MINI more difficult and usually compared it to Volkswagen's New Beetle or to Toyota's Scion. The New Beetle was introduced in 1998 with the tagline "Drivers Wanted," which was similar to MINI's "Let's Motor." Volkswagen's ad agency, Arnold Communications, initially catered to nostalgic baby boomers, with copy declaring "Less flower. More Power" or "If you sold your soul in the '80s, here's your chance to buy it back." After its launch in 1998 demand for the New Beetle skyrocketed, and according to the Financial Times, by October 1998 Volkswagen had sold 64,000 units. By 2003, however, sales of the New Beetle had slowed drastically, and between 2001 and 2002 Volkswagen reduced production by 18 percent. "Volkswagen's New Beetle and Chrysler's PT Cruiser … often prove to be 'fashion statements' with relatively quick boom-and-bust cycles," wrote Paul Eisenstein in the Cleveland Plain Dealer.

According to Forbes magazine, Toyota introduced the Scion in 2004 with substantial success. In its first year sales of the Scion matched those of the MINI. Compared to the MINI, however, Scion explicitly targeted a younger market, Generation Y, those born between the early 1980s and the late 1990s. In 2004 Toyota spent 70 percent of its Scion marketing budget on lifestyle events, including nightclubs and small-venue concerts. Scion even allowed consumers to accessorize the car over the Internet before stepping foot on a lot. Jim Farley, vice president of Scion, told Ward's Dealer Business that more than 50 percent of Scion customers had configured their vehicles online, adding an average of $1,200 in accessories.

MARKETING STRATEGY

According to an interview with Martin in the New York Times, the planning for the "MINI Robots" campaign began in late 2002 after Crispin Porter + Bogusky had requested a comic book or novel about robots. The campaign was developed over the following 18 months and launched in March 2004. "[The campaign] started as, 'Hey, let's build robots out of car parts,'" said Alex Bogusky, partner and executive creative director of the agency. It slowly morphed into a detailed campaign in the belief that, "if people are involved with it, they spend a lot of time with it, a good 45 minutes to an hour."

Beam, an outside company, assisted Crispin Porter + Bogusky with the "MINI Robots" main website, http://www.r50rd.co.uk. Zoic Studios supplied the video clips depicting Dr. Mayhew's daily experiments, including colossal MINI robots reaching down to grab SUVs before they plowed into test walls. Four additional websites were created by Crispin Porter + Bogusky. The first was a website for the fictional journalist Rowland Samuel. The second, for Samuel's fictitious publishing company, Casson, depicted mock upcoming releases about Bigfoot, Loch Ness, and alien crop circles. The last two were Geocities websites, on Yahoo, including a personal website for Dr. Mayhew and one posting the latest MINI robot sightings around Oxford.

After the websites were up, the 40-page insert "Men of Metal: Eyewitness Accounts of Humanoid Robots" appeared in such consumer magazines as Motor Trend, National Geographic, and Rolling Stone. The insert was written by the fictional Samuel, a freelance writer who bumped into an acquaintance at an Oxford party. The two began one-upping each other with urban legends, until Samuel's acquaintance claimed a friend had photographed a giant robot that saved a car from hydroplaning. Enticed by the story, Samuel probed others connected to the photograph in order to prove or disprove the story. Using testimonials and photos as evidence, "Men of Metal" duped a significant portion of its readers.

Ambiguity fueled the buzz over "MINI Robots." For the first two months of the campaign MINI logos and branding were omitted from the websites and the novelette. "We wanted people to experience it without us making a big announcement," Bogusky told the New York Times. The robots were not demystified until April, when Crispin Porter + Bogusky put up posters throughout New York City and Los Angeles featuring the MINI logo above the robot images. A "Robots" option appeared as well on the drop-down menu of the MINI USA website, allowing visitors to accessorize the robots with MINI-like features. Though "some people will be disappointed" after discovering the truth behind the "MINI Robots" campaign, Bogusky told the New York Times, "most people appreciate you doing something different."

OUTCOME

Public response to "MINI Robots" was almost immediate. Crispin Porter + Bogusky reported that a week after its introduction the "MINI Robots" main website had received more than 46 million hits. By October 2004 it had attracted more than 1 million visitors. MINI USA received E-mails from people who said that they enjoyed the campaign so much they were going to a dealer.

THE BEATLES DROVE MINIS

Despite selling a mere 10,000 units in the United States during the 1960s, Mini still managed to surface in the American psyche via celebrities. As Out Motoring stated, "It is always the 1960s for which it will be remembered … These 10 years saw the Mini go from a 'housewives shopping car' to a must have fashion accessory." James Garner, Twiggy, the Beatles, Peter Sellers, and even Steve McQueen drove Minis.

MINI seemed to be avoiding the boom-and-bust pitfalls that had haunted the New Beetle and the PT Cruiser. BMW projected selling only 25,000 MINIs in 2002–04, the first three years of its reintroduction in the United States, but in the first year alone more than 20,000 units were sold. This increased to 34,000 in 2003 and 36,000 in 2004, by which time the MINI was making up 11 percent of BMW's total sales. In 2004 sales of the MINI were still outstripping the supply, with a six-month waiting list for cars with certain features. Bogusky boasted about the success of "MINI Robots" to the New York Times: "I've never gotten e-mails about a billboard or a television commercial saying, 'I'm going to buy a car because of this.' Here, we've gotten several."

Many industry critics, as well as Crispin Porter + Bogusky and MINI USA, believed that the "MINI Robots" campaign had created a new model in the advertising industry. For example, other viral marketing campaigns appeared in 2004. To market its liquid-crystal Aquos television, Sharp disseminated rumors that $3 million was stashed in hidden urns that could be located by using its website. For Lee Jeans, Fallow created a blog and answering-machine message supposedly left by a 90-foot model. "MINI Robots," along with Sega's "Beta-7" campaign, created a paradigm that treated consumers as willing participants, not passive observers. "We're going from the Golden Age of advertising to the Information Age of advertising," Bogusky told Advertising Age's Creativity. "And it's not going to be as easy for this generation to judge the brilliance of this new age."

THE HIRE CAMPAIGN

OVERVIEW

In 2000 Bayerische Motoren Werke AG (BMW) posted total sales of $33 billion, a slight decrease from its 1999 earnings of $34 billion. Afraid of further backsliding, the Bavarian automaker decided to reshape its advertising to better target the Internet-savvy BMW customer. Before 2001 the company's advertisements had typically consisted of product-driven campaigns with immaculate BMWs clinging to mountain roads. BMW asked its longtime advertising partner, Fallon Worldwide, to create something different. In 2001 five action-packed short films emerged under the campaign title "The Hire," which became one of the most acclaimed campaigns in advertising history.

After working with BMW to develop the idea of a James Bond-type hero who drove various BMWs, Fallon enlisted David Fincher's film-production company, Anonymous Content. Fincher then successfully wrangled some of Hollywood's biggest guns—including directors Guy Ritchie and John Frankenheimer and actors Madonna, Forrest Whittaker, and Mickey Rourke—to create the five short films. Three more films were created in 2002 to promote BMW's new Z4 roadster. All eight starred Clive Owen (Croupier, The Bourne Identity) as the "hired" driver who found himself driving a BMW in every spot. "The Hire" was promoted much like a feature film would have been, with movie trailers, print ads, and Web ads.

The five initial films cost an estimated $15 million, and the three made in 2002 cost about $10 million. "The Hire" catapulted BMW's exposure into film festivals, awards shows, and even an exclusive BMW DirecTV channel. By 2002 BMW sales were up 17 percent, while some of its competitors, such as Volkswagen and General Motors, floundered. By June 2003 more than 45 million people had viewed the films, overshooting the original goal of reaching 2 million viewers. "The Hire" garnered numerous ad industry awards. The campaign's final spot, "Beat the Devil," aired November 21, 2002.

HISTORICAL CONTEXT

BMW, founded in Germany in 1913, awarded most of its advertising work to the Minneapolis-based agency Fallon in the mid-1990s. Three different BMW/Fallon campaigns preceding "The Hire" had mostly consisted of "hard-driving, product-focused efforts designed to show what it's like behind the wheel of a BMW," Jim McDowell, vice president of marketing at BMW North America, told Advertising Age. BMW and Fallon felt their campaigns' flavor had been so overused by competitors that the original uniqueness had washed out. Wanting to launch a more unprecedented campaign, BMW asked Fallon for something new, but Fallon's creatives felt confined within the restraints of traditional television spots. They wanted to show BMWs for longer periods of time and to truly push BMW's performance to the point of damaging the car, which was something unheard of for a car commercial. "In response to our plea," Bildsten said in an interview with Shoot, "[BMW] sent us this letter that was just amazing. They were telling us, 'Take off the gloves. Do whatever you want. We want you to really stretch.'"

After finishing a Timex campaign that included the use of video clips in Internet advertising, David Carter and Joe Sweet, two of Fallon's art directors, were eager to try different filming techniques. "One night I challenged [Carter and Sweet] to come up with something cinematic," Bildsten told Brandweek. "They came back the next morning with the whole idea almost completely worked out." When they took it to BMW, "it took us about 30 minutes to present and 10 seconds for them to give us a green light."

TARGET MARKET

"The Hire" largely arose from Fallon and BMW's growing concern that past campaigns had been missing the company's target audience: well-to-do, high-achieving males who usually researched purchases using the Internet and lacked the time to watch network television. Research showed that consumers inclined to purchase BMWs were also broadband-connected, tech-savvy males and that 85 percent of this population studied BMW's cars online before even stepping into a showroom. As far as whom the campaign would appeal to, McDowell explained to Advertising Age, "We would have guessed that our central tendency would have been 25-year-olds, but actually from our early measurements we got people older and more affluent than that." Knowing that the mature target audience was keener on the viewing experience than on the interactive experience, Fallon purposely avoided using gaming software on the campaign's website, http://www.bmwfilms.com.

To study the effectiveness of "The Hire," BMW and Fallon devised units of measurement called "BMW minutes," which calculated how much time viewers spent with the new Internet campaign compared to previous television campaigns. "We were astonished to discover that a major fraction of the total BMW minutes were Internet minutes," McDowell told Advertising Age. Males made up 68 percent of the viewers, 42 percent of whom came from households with incomes greater than $75,000. The second suite of "The Hire" films featured BMW's new Z4 roadster, which aimed at a demographic that could hopefully afford them. In late 2002 BMW began running its eight films on an exclusive BMW channel for DirecTV. The channel, which was available for a limited time, interspersed the films with behind-the-scenes footage and special "subplot" spots.

COMPETITION

Mercedes-Benz, the German luxury arm of DaimlerChrysler, was the top-selling luxury brand in the United States in 1999, a position it maintained until losing ground to BMW and to Toyota's Lexus in 2002. For the same year's first 10 months Mercedes units sold dropped by 1,500, losing out to BMW's incredible 17 percent sales growth that year. "Mercedes has been improving its quality but it hasn't been keeping pace with the rest of the U.S. industry," Brian Walters, director of quality research at J.D. Power and Associates, explained to Bloomberg News. In an attempt to reproduce BMW's campaign success, Mercedes's London-based ad agency, Campbell Doyle Dye, faked a movie trailer for a supposed upcoming film called Lucky Star. Never admitting to be just an advertisement, the movie "trailer" broke in U.K. movie theaters July 4, 2002. Lucky Star pretended to be the next release from producer Michael Mann (The Aviator, Collateral) and portrayed Benicio Del Toro as a man acting independently to clean up Chicago's commodities exchange. The spot periodically showed Del Toro masterfully speeding through Chicago in a $90,000 Mercedes 500 SL.

Toyota Motor Corp.'s Lexus luxury division rose up to be the luxury-car industry leader, selling more units than BMW or Mercedes in 2001. Besides the sales success, Lexus dominated as the most reliable in its industry; according to J.D. Power and Associates, Lexus cars had fewer than half of the problems, after four and five years, that the average cars and trucks had. In 2001 Lexus decreased its ad spending. By 2002 the carmaker's ad agency, California-based Team One Advertising, had focused its efforts on the remodeled ES300 sedan.

MARKETING STRATEGY

Initially, Fallon and BMW had decided to film one serialized 45-to-60-minute film featuring a suave hero who saved, kidnapped, and escorted people using different BMW models. Fallon approached production company Anonymous Content, headed by David Fincher (director of Se7en and Fight Club), to produce the film. Fincher recommended that the spots be broken into five different films in order to facilitate file downloading and allow more flexibility in attracting talent to work on the project.

Following Fincher's advice, Fallon developed scripts for five short films. In producing "The Hire," Fincher and Fallon went so far as to create a dossier, complete with FBI and CIA files, just to flesh out the films' hero. Fincher then solicited some of Hollywood's top directors. The final list included Ang Lee (Crouching Tiger, Hidden Dragon), John Frankenheimer (The Manchurian Candidate), Wong Kar-Wai (Chungking Express), Guy Ritchie (Snatch), and Alejandro González Iñárritu (Amores Perros). The scripts, ranging from dark to hilarious, were distributed according to each director's style. Anonymous Content chairman Steve Golin told Shoot, "The good news is that these weren't commercials. We had very few restrictions. The budgets were equivalent to [those of] high-end commercials."

Fallon flipped the advertising equation upside down by spending 90 percent of its budget on production and only 10 percent on media. The reduced media expenditure was initially seen as a huge risk. According to Advertising Age's Creativity, a BMW rep warned Fallon, "Either nobody will notice, or this will be a smashing success."

SUBPLOTS IN "THE HIRE"

Short subplots, which loosely linked the campaign's first five storylines, were filmed quickly, and with a digital video camera, by Ben Younger and Director of Photography William Rexer. The filming of one scene, which looked like a real-life occurrence to most onlookers, involved a "car thief" slamming a "hit man" onto a car hood in New York. "Some of the reactions I got from people who weren't real extras were so good that we had to hunt people down [to get permission to include them in the films]," Younger said in an interview with Shoot magazine. "I loved the reaction of one armored-car guy, so we paused the frame, took down the name on the side of the truck, and called the company to get a waiver from him."

For each of the six-to-seven-minute films, subplots were also created in an attempt to weave the film storylines together. British actor Clive Owen, whose character became the common thread for the entire campaign, always played the skillful hired driver. Frankenheimer's "Ambush," the campaign's debut film, first became available for download on http://www.bmwfilms.com on April 26, 2001. It featured the hired driver saving a diamond smuggler from machine-gun toting assailants in a cargo van. Fallon released each of the following four spots every two weeks. Typical Hollywood methods, including broadcast spots, billboards, and free posters, were used to promote the films. Print ads ran in Hollywood trade magazines Vanity Fair, Entertainment Weekly, and Rolling Stone. The trailers for "The Hire," resembling regular movie trailers, aired on VH1, Bravo, and the Independent Film Channel. One of Fallon's biggest challenges was to pitch the films as entertainment but to still disclose BMW's involvement. "We wanted to avoid the 'microbrew syndrome,'" Bildsten explained to Brandweek, "like where you look down and see that [your beer] was actually made by Anheuser-Busch." "The Hire" was also uniquely filmed to fit computer screens. "No one had ever done an internet project of this magnitude, and we had a lot to learn," Fallon producer Robyn Boardman told Advertising Age's Creativity. "There are different things to keep in mind when shooting for the web. File size, for starters, and the fact that wide shots don't play well."

Due to overwhelming Web traffic, ad-industry praise, and BMW's bottom-line success in 2002, a "second season" consisting of three films began airing October 24, 2002. The second crop involved an equally renowned roster of names. Instead of Anonymous Content, all spots were produced by Ridley Scott (director of Blade Runner and Gladiator), who recruited directors Tony Scott (Top Gun), John Woo (Face/Off), and Joe Carnahan (Narc). The actors included Gary Oldman, James Brown, Don Cheadle, Ray Liotta, and of course, Clive Owen, returning to star in the final three films. The last of the films was released at the end of 2002. Even though BMW ended their 10-year relationship with Fallon in 2005, the eight films remained available on http://www.bmwfilms.com.

OUTCOME

"The Hire" raked in a plethora of advertising awards, including two Grand Clio Awards and a Grand Prix Cyber Lion at the International Advertising Festival in Cannes, France, along with Best of Show at the One Show Interactive competition. The campaign was praised not just by the ad industry; it earned kudos within the entertainment arena as well. "Hostage," from the second series of films, earned the award for Best Action Short during the Los Angeles International Short Film Festival in 2002. Entertainment magazines began reviewing the films. Even the New York Times gave the films a favorable review. Their entertainment value garnered media coverage not accessible to typical advertisement. "We'd hoped for a good response, but we never thought it would be as strong as it was," Bildsten told Shoot in 2001. "BMW recorded over eleven million film-views. And according to their research, it really worked. [The films] got people to not just pay attention, but to buy cars."

By June 2003 the films had been viewed more than 45 million times. BMW's sales rose 17.2 percent between 2001 and 2002, helping the automaker to outsell Mercedes and placing it second only to Lexus in the luxury-car market. From an ad industry perspective, the greatest pinnacle of "The Hire" may have been winning the first-ever Titanium Lion, the highest honor at the Cannes International Advertising Festival. The award recognized a campaign that caused "the industry to stop in its tracks and reconsider the way forward."

MADONNA PLAYING THE SPOILED DIVA

The campaign's fourth film, "Star," featured a spoiled diva who received her comeuppance after whining and complaining about the slow speed of Clive Owen's driving. After smirking through a few minutes of her wrath, Owen slammed down the accelerator and ping-ponged the "star" in the backseat for a solid two minutes. Guy Ritchie, the director and cowriter of "Star," talked his wife, Madonna, into playing the part. "When he signed on, we didn't think she'd be along, we just desperately wanted him," Fallon's Bildsten told Shoot, adding that the actresses originally considered for the role "were a little more washed-up than her."

Bayerische Motoren Werke AG

views updated May 23 2018

Bayerische Motoren Werke AG

Petuelring 130
Munich D-80788
Germany
Telephone: +49-893-822-4272
Fax: +49-893-822-4418
Web site: http://www.bmw.com

Public Company
Incorporated: 1917
Employees: 114,874
Sales: US$34.64 billion (1999)
Stock Exchanges: OTC
Ticker Symbol: BAMXF
NAIC: 336111 Automobile Manufacturing; 42111 Automobile and Other Vehicle Wholesalers; 336991 Motorcycles

Bayerische Motoren Werke AG, popularly known as BMW, is a global manufacturer and marketer of luxury automobiles and motorcycles. In addition to its BMW brand, the company owns Rover Cars’ Mini brand of cars, a vestige of its failed ownership of Rover Group Ltd. In an era of rapid consolidation within the global car industry, BMW is one of the few independent companies in operation. The Quandt family, the company’s largest shareholder for more than 40 years, owns more than 45 percent of BMW.

Origins As an Aircraft-Engine Builder

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 Josef’s army. Popp hired Max Friz, an aircraft engine designer from Austro-Daimler; together in Munich they established Bayerische Motoren 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. Its 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 1930s.

The company’s interests in motorcycle manufacture developed rapidly in the early 1920s. 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 upon; Dr. Wilhelm Kissel, Daimler-Benz’s chairperson, and Popp, at Bayerische Motoren, joined each other’s supervisory boards. A smaller 6-cyUnder model of the Dixi proved to be a most effective competitor in the Daimler-Benz market, however, 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. A total of 5,390 DA2s, 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, the Luftwaffe. In the same year, BMW acquired licenses to produce the 525 horsepower 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 longfamiliar “kidney” shape. Lighter than comparable models, the 303 was 50 percent 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 previously had been devoted to motorcycle manufacturing. A 1939 edict of the German Ministry of Aviation required Branden-burgische 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 postwar 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. Production in 1950 increased to 17,000, 18 percent of which was exported.

Post-World War II: The Emergence of a Luxury Car Maker

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. They proved to be too expensive, however, for the majority of West German motorists. To add to BMW’s woes, its motorcycle sales dropped drastically, and the Allach factory had to be sold.

The company’s fortunes revived a little in the late 1950s during the era of the “bubble car.” Its 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 its 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 six 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.

Company Perspectives:

It has always been the desire of BMW to create automobiles of unmistakable identity. As you can see, this has posed no problem to us over the last eight decades. But what you cannot see is the one thing that has always been true about BMW automobiles both in the past as well as in the present: a BMW is always the ultimate driving machine.

The 1970s, 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 U.S. importing, marketing, distribution, and support subsidiary was formed in Montvale, New Jersey, and later in the 1970s the company built a car plant at Steyr in Austria.

Early in the 1970s, it appeared that Bayerische Motoren’s interests in motor racing, operated by BMW Motorsport GmbH, might be curtailed; in fact, however, 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 1980s as a producer of turbo-charged diesel engines. By the mid-1980s, the factory was a major petrol engine manufacturer and at full capacity could 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 offroad race. The company’s motorcycles won this rally four times in its first six years.

BMW’s car sales during the 1970s and 1980s increased along with the demand for higher-priced models, and healthy domestic sales were 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 suffered. High unemployment, high interest rates, and loan restrictions decreased the purchasing power of a crucial motorcycle market—young Europeans; and competition from Japan became fierce.

As the company entered the 1990s, competition from Japanese car manufacturers represented perhaps the greatest threat to BMW’s future growth, although high German labor costs continued to be a perennial problem. Adopting design characteristics from European luxury models, the Japanese produced cars of similar quality, yet sold the cars at substantially lower prices than those offered by European manufacturers, including BMW. Exacerbating BMW’s woes, economic conditions in Europe soured during the early 1990s, portending dismal financial results for the coming years. Despite these ominous developments, however, BMW entered the decade in sound shape. BMW exhibited a vitality few other European car manufacturers could muster, thanks to robust sales during the 1980s and comparatively small debt. In this regard, BMW was the exception rather than the norm in a troubled European automobile industry. But the 1990s promised to be quite different from the 1980s, when luxury items and luxury cars sold extremely well, and as the company charted its future it braced itself for less profitable times.

1990s: The Rover Saga

As the recession increased in intensity, BMW’s financial performance suffered, but not to the extent that other European manufacturers exhibited. The most glaring decline in the company’s growth took place at its U.S. operations, where the Japanese struck their first blow in the luxury car market, and the German mark’s strength against the dollar slowed sales and squeezed profit margins. By 1992, BMW of North America was recording a 50 percent decline in sales from the subsidiary’s peak years in the mid-1980s. BMW management regarded the American situation as boding ill for its European operations. To strengthen its position in the United States, the company announced plans that year to construct an approximately US$300 million assembly plant near Spartanburg, South Carolina, which, through the plant’s state-of-the-art equipment, was designed to produce 72,000 cars a year. Half of this annual production volume the company planned to export overseas, which lessened BMW’s dependence on its domestic production facilities and the associated high labor costs of German workers.

In 1993, von Kuenheim ended his 23-year reign at BMW and was replaced by Bernd Pischetsrieder, who had spent his entire career at BMW. Under Pischetsrieder’s stewardship, BMW concluded a momentous acquisition that promised to dramatically change the company’s future and bolster its position worldwide. In January 1994, less than a year after gaining control of BMW, Pischetsrieder announced the acquisition by BMW of Rover Group Ltd., the esteemed British manufacturer of sport utility vehicles (SUVs) and Rover Cars. The purchase, a US$1.2 billion deal, immediately doubled BMW’s share of the European market to 6.4 percent and gave the company a prestigious presence in the SUV market, which was growing exponentially during the early 1990s. The purchase of Rover Group stunned the industry, particularly Honda Motor Company, which held the remaining 20 percent interest in the British car manufacturer and did not learn of BMW’s purchase until three days before Pischetsrieder’s announcement.

Key Dates:

1913:: Inventor Karl Rapp opens an aircraft design shop.
1917:: Rapp’s original business leads to the formation of Bayerische Motoren Werke AG, under the direction of Franz Josef Popp and Max Friz.
1918:: First BMW aircraft engine is built.
1929:: First BMW car is built.
1959:: Herbert Quandt becomes BMW’s dominant shareholder.
1962:: Introduction of the 1500 model creates a lasting market niche for BMW.
1994:: British-based Rover Group Ltd. is acquired for US$1.2 billion.
2000:: After years of losses due to an unsuccessful assimilation of the Rover brand, Rover Group Ltd. is divested.

BMW’s prospects after the acquisition of Rover Group were exceedingly brighter. With the addition of Rover Group, BMW gained not only an entry into the fast-growing SUV market, but also the high-volume business of Rover Cars. Pischetsrieder’s bold move, made less than a year after he took the helm, was designed to usher BMW into the mainstream with a product line geared toward the mass market. One line of thinking held that BMW was too large to compete as a niche player catering exclusively to the premium segment of the car market and too small to compete as one of the major global concerns. The acquisition of Rover Group, when viewed from this perspective, represented a solution to the company’s dilemma, giving it a product line that stretched from entry level models all the way through to the high-priced, luxury end of the market. Pischetsrieder’s formidable task was to make the strategy work. If he succeeded, the BMW of the late 1990s and beyond would figure as a full-bodied car manufacturer, competing model against model with global heavyweights such as Ford Motor Co. and General Motors Corp.

As Pischetsreider set out to incorporate Rover Group into BMW’s fold, a change of command occurred in the backdrop. The publicity-shy Quandt family, which owned nearly 50 percent of BMW, had controlled the company since Herbert Quandt became its dominant shareholder in 1959. Johanna Quandt sat on BMW’s supervisory board when the Rover Group acquisition was made, but in 1997 she relinquished her post to the fourth generation of Quandt leadership, sister and brother Susanne and Stefan Quandt. When the Quandt siblings assumed control, they, like the industry analysts who were charting Pischetsrieder’s progress, wanted to know why Rover Group was continuing to lose money three years after its acquisition.

The marriage between BMW and Rover Group was failing miserably, leading one BMW shareholder to describe the acquisition as the worst investment deal in German corporate history, according to the May 17, 2000 issue of the Financial Times. The financial losses incurred by Rover Group were numbing. As BMW poured billions of dollars into the company, all it received in exchange were successive years of financial losses, punctuated by a staggering US$1 billion loss in 1998. Critics charged that BMW never properly assimilated Rover Group into its fold and that the company gave U.K. managers too much control. Consequently, the branding of BMW cars and Rover Cars never came together to form a cohesive strategy. Instead of using Rover Cars to gain entry into the mainstream market, BMW marketed the British cars as a premium brand, despite the fact that the cars were distinctly midmarket models. What BMW was left with was two premium brands that competed against one another and no solution to the dilemma that had precipitated the purchase of Rover Group in the first place.

Disaster loomed as BMW entered the last year of the 1990s, a year that would end with another US$1 billion loss recorded by Rover Cars. In February 1999, a board meeting was held to determine the fate of Rover Group. By the end of the meeting Pischetsrieder had resigned, as had his deputy and heir apparent, Wolfgang Reitzle, leaving a leadership vacuum that was filled by little-known Joachim Milberg, an academic who had joined BMW a mere six years earlier. With Milberg in charge, BMW continued to suffer both from the losses incurred by Rover Cars and from the distraction the British subsidiary caused, which adversely affected the progress of BMW’s luxury car business. Sales of Rover Cars fell approximately 25 percent in 1999, a year in which the launch of Rover 75, a US$30,000 luxury sedan, was delayed by six months. In response, increasing numbers of BMW’s research and development staff were dispatched to develop new models and improve production quality at Rover, but the rescue efforts occurred at a time when the company was under great pressure to develop new BMW models. BMW’s luxury sedan business began to suffer from the distraction, as Mercedes eclipsed BMW in the lucrative U.S. market in 1999. In Europe, the company’s market share fell to 3.1 percent, dropping from the 3.4 percent the company held in 1996.

As BMW entered the 21st century, the struggle to resuscitate Rover Cars continued. Milberg promised to improve quality standards and to turn Rover Cars into a profitable enterprise by 2002. To show his commitment to the ailing British subsidiary, which the German business press had dubbed “The English Patient,” Milberg announced plans to invest roughly US$5.3 billion in Rover Cars between 2000 and 2005, an investment that represented one-third of BMW’s total projected spending during the period. By March 2000, however, the company had conceded defeat and announced it would abandon its efforts at Rover Cars. During BMW’s six years of ownership it spent an estimated US$4.4 billion on Rover Cars. The decision to dispose of Rover Group led to a US$2.85 billion restructuring charge and left Milberg with the daunting task of formulating a future for BMW in the post-Rover era.

Rover Cars was sold to Phoenix Consortium, a loose alliance of English businessmen who paid a nominal fee of US$15 for the beleaguered carmaker. Ford Motor Co. acquired Rover Group’s Land Rover SUV operations. BMW retained ownership of Rover Group’s Mini brand. Milberg planned to release an entirely revamped line of Mini cars in 2001. Milberg also planned to develop an entry-level BMW in the midprice segment to take on Volkswagen’s US$14,000 Golf, which dominated the midprice segment in Europe. The company’s plans also called for the development of the luxury brand Rolls-Royce, which was set to come under BMW’s control in 2003. As the company pushed forward, amid speculation that it would be acquired by a larger competitor, few certainties about its future existed, making the first years of the 21st century a critical period in BMW’s history.

Principal Subsidiaries

BMW Ingenieur-Zentrum GmbH; BMW Rolls-Royce GmbH (50.5%); BMW Bank GmbH; BMW Maschinenfabrik Spandau GmbH; KONTRON GmbH; BMW Leasing GmbH; BMW Mo-torrad GmbH; BMW Fahrzeugtechnik GmbH; BMW INTEC Beteiligungs GmbH; BMW M GmbH; KONTRON Elektronik GmbH; BMW Motoren Gesellschaft m.b.H. (Austria); BMW Coordination Center N.V. (Belgium); BMW France S.A.; BMW (South Africa) (Pty) Ltd.; BMW Finance N.V. (Netherlands); BMW Austria Gesellschaft m.b.H.; BMW Overseas Enterprises N.V. (Curacao); BMW Holding AG (Switzerland); BMW (Schweiz) AG (Switzerland); BMW Holding AG (Switzerland); BMW Japan Corp.; BMW Holding Corporation (U.S.A.); BMW Ltd. (Great Britain); BMW Italia S.p.A.; BMW Iberica SA. (Spain); BMW Australia Ltd.; BMW Belgium S A.; BMW Canada Inc.; BMW Nederland B.V.; BMW Sverige AB (Sweden); BMW New Zealand Ltd.

Principal Competitors

DaimlerChrysler AG; General Motors Corporation; Ford Motor Company; Toyota Motor Corporation; Volkswagen AG.

Bayerische Motoren Werke AG

Bayerische Motoren Werke AG

Principal Subsidiaries

Further Reading

Bayerische Motoren Werke AG

Bayerische Motoren Werke AG

COUNTERFEIT CAMPAIGN

OVERVIEW

HISTORICAL CONTEXT

TARGET MARKET

COMPETITION

MARKETING STRATEGY

TOUGH LOVE

OUTCOME

FURTHER READING

MINI ROBOTS CAMPAIGN

OVERVIEW

HISTORICAL CONTEXT

TARGET MARKET

THE ITALIAN JOB

COMPETITION

MARKETING STRATEGY

OUTCOME

THE BEATLES DROVE MINIS

FURTHER READING

THE HIRE CAMPAIGN

OVERVIEW

HISTORICAL CONTEXT

TARGET MARKET

COMPETITION

MARKETING STRATEGY

SUBPLOTS IN "THE HIRE"

OUTCOME

MADONNA PLAYING THE SPOILED DIVA

FURTHER READING

Bayerische Motoren Werke AG

Bayerische Motoren Werke AG

Origins As an Aircraft-Engine Builder

Post-World War II: The Emergence of a Luxury Car Maker

Company Perspectives:

1990s: The Rover Saga

Key Dates:

Principal Subsidiaries

Principal Competitors

Further Reading

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Bayerische Motoren Werke AG

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