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BMW through the Ages: A Condensed History of the “Ultimate Driving Machine”

BMW

The famous blue and white rotors of BMW have been a symbol of automotive excellence and quality for a century now. All over the world BMW manufactured cars and motorcycles are a signifier of elegance and luxury; counting as one of the few brands that still maintains their appeal as a global status symbol especially as company cars for business executives.

However, it wasn’t always this way, like any other multinational behemoth, BMW started from relatively obscure beginnings, and needed more than its fair share of luck to survive and achieve the rarified position it enjoys today.

Inception of BMW

The story of BMW or Bayerische Motoren Werke (Bavarian Motor Works) starts with two men, Daimler employed engineer Karl Rapp, and aircraft engine manufacturer Gustav Otto. The two men’s paths crossed in 1916, when Rapp’s small subsidiary company Rapp Motor, secures a contract with Prussia and Austro-Hungary to supply 25 large V12 engines to aid in the country’s war efforts. Unfortunately the resulting product has issues with vibrations and unreliability, stuck in a bind, Rapp turns to Otto’s factory, outsourcing his engine requirements to the renowned manufacturer.

Recognizing a good deal when he sees it, Rapp Motor business director Franz Josef Popp, decides to absorb the Otto’s manufacturing operations. Thus the “Bayerische Motoren Werke GmbH” is born on March 7th 1916, the official birth date of the company that would become known as BMW.

Soon it becomes clear that the company needs further financing to secure its expansion and long-term survival. So in 1918, BMW becomes BMW AG, a publically traded company on the stock exchange. Immediately shares with a combined value of 12 million are released into the market. Almost 70% of these are snapped up by Bavarian business owners and banks such as the Bayerische Bank, and Nuremberg-based industrialist Fritz Neumeier. The final third is secured by a financier brought on by Josef Popp, Camillo Castiglioni the then head of the Viennese Wiener Bankverein, the fourth largest bank in the country. Along with Rapp, and Otto, these three men are now accepted as the founders of BMW.

The First Car

After the World War I much of Germany’s manufacturing industry was in disarray. Previously recognized as an industry leader in the manufacture of airplane engines, the restrictions placed on the production of warplanes in the Treaty of Versailles decimated BMW’s business interests. BMW’s primary factory in Munich was shut down in 1918, and the company would have gone under had Castiglioni – acknowledged as one the richest men in Europe at the time, not purchased the brand and engine building business outright.

The headquarters were relocated to Otto’s previous factory on Lerchenauer Straße 76, and it has been the company’s central location ever since. Under Castiglioni’s direction, BMW’s new remit was diversification, and they started by manufacturing motorcycles. The R 32 was the company’s first foray into automobile manufacturing. This 500 cc air-cooled machine gave birth to many of the design specifications BMW’s R-series bikes still follow.

It wasn’t until 1928 that they took the plunge into car manufacturing. The first BMW vehicle was no more than a licensed replica for German markets, a copy of the Austin 7 marketed as the “Dixi” in Germany. This car had none of the hallmarks BMW is known for today, providing instead a simple, affordable car that nevertheless proved immensely popular to the public. By 1932 as the license with Austin expired BMW had moved to its own design, a larger more luxurious 6 stroked engine car known as the 303.

World War II

By the 1930’s Germany had started to prosper once again, and many of the restrictions of the Treaty of Versailles had been shaken off. Given the go-ahead, BMW once more resumed its manufacture of aircraft engines. With government assistance, BMW’s operations were expanded to a large-scale industrial plant that took advantage of technical advancements in automated engineering; an assembly line of engines was born. While BMW was still producing motorcycles, the bulk of its efforts were dedicated towards the nation’s move to re-arm, once again taking on the role of armament and war materials manufacturer.

This period saw some stunning achievements in engineering and design with the company producing what’s still considered one of the finest engines of all time the BMW 801, aircraft engine. However these advancements were qualified by some glaring atrocities as almost 50% of the company’s labor was supplied by concentration camp prisoners. These workers were subjected to horrifying conditions, and the ugly legacy of this history is still borne by the company today.

Post-War Failures

The tail-end of the war saw many BMW manufacturing sites heavily bombarded, much of the company’s facilities were completely destroyed with the main Munich factory reduced to mere rubble. As a primary arm of Germany’s war efforts, BMW was banned from the production of any motor vehicles and had to subsist by producing and selling pots and pans from repurposed aircraft material.

In 1947 the company was given the go-ahead to return to motorcycle production, they returned to the industry with the R-35 an update on their original design. Over the next year the company would release multiple models of bikes, but had still not re-found its foothold in car manufacturing. Only in 1951 did BMW decide to create a new version of their once-famous 303, by releasing the luxurious 501 model car. However the market had moved on since the 1930’s, by now, compact and maneuverable Volkswagen’s and Ford’s had entered the market driven by assembly line manufacture. BMW’s efforts in comparison seemed like a bulky throwback to a bygone age.

One of the few successes the company found in the 50’s was its licensing of the Italian brand micro-car Isetta. This tiny vehicle sold 10,000 models in just its first year and provided some much needed relief to BMW’s ailing car manufacturing division. Despite this, by the end of the 50’s BMW was still primarily known as a motorcycle manufacturer in a country that was moving away from bikes and mopeds towards automobiles.

By 1958 share prices had tanked, and the company was nearing liquidation. Daimler-Benz was poised to take over, and the company’s major shareholders considered liquidation. However throughout the company, from mechanic to director the decision was made to fight off the slump. A massive share buyback effort was started, and eventually this enticed German entrepreneurs Herbert and Harald Quandt to expand their holding in the company. The brothers bought almost 2/3 of the company, retaining a controlling interest and brought the company back from the brink of bankruptcy.

By the early 60’s, BMW was back. With the release of wildly popular car models such as the 700 series 697 cc sedan and coupe, as well as the “new class” of 1500 series sporty sedans the company had recaptured the imagination of the German public.

Into the Modern Day

Throughout the 60’s BMW would make name for itself as a premiere brand for racing enthusiasts, following up their 1500 lines of coupes and sport sedans with the 1600 and 1800 series. By decade end the sights were firmly set on old-time rival Mercedes, as BMW moved into the manufacture of larger luxury cars once more with their “BMW New Six” cars, the predecessor to the modern day 5 and 7 series models.

The 70’s saw long-serving CEO Eberhard von Kuenheim take over at the helm of the company. His efforts saw car production expanded into new markets, with factories opened in Austria, South Africa and partnership struck with Japanese manufacturers as well. This decade saw BMW receive many commendations for its advances in motorsport which fueled the company’s new vision to provide sports cars for the average customer. Thus the now renowned 3-seies and 5-series models were born.

By the 90’s BMW had founded Research and Innovation centers dedicated to moving the brand into the 21st century. 1994 also saw the company break into one of the biggest traditional markets for car manufacturers the USA, with a plant built Spartanburg, South Carolina. Two major acquisitions in Land Rover and Rolls Royce were also made.

The purchase of Land Rover would prove to be a costly mistake with ownership of the brand lasting only 6 years, causing massive fluctuations in BMW share price resulting in the brand being repositioned several times at varying points as a luxury vehicle and a mass-market car. Rover was sold for only 10 GBP in 200-, with the only notable gain to BMW being the retention of the rights to the Mini.

BMW’s Share Price and Standing Today

With new factories established in China, a Rolls Royce facility in Goodwood and a Mini production based line in Oxford the 21st century has seen BMW expand and grow. The tumultuous times of the 20th century have largely been cast off, and conversely today the company is associated with stability and consistency.

Between 2010 and 2015 car production has risen from 1.49 million units to 2.03 million units. As of 2010 it was the largest car manufacturer in the luxury market and held 40% of the share in this lucrative segment.  Despite record profits and sales figures that dwarf those of competitors GM and Ford, BMW’s share price today is still positioned attractively  for prospective buyers, coming in at the lowest of the four major automobile companies, including Mercedes.

Overall the last decade has seen BMW share prices maintaining at only 1.5 times the value of the company’s book value despite growth in revenue, sales and market share year-on-year. In fact the end of 2016 even saw a brief dip of 4% in BMW share price as the company’s figures didn’t meet sky-high market expectations, with operating profit falling to €9.39 billion from an expected €9.89.

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