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October 1997

BMW - The Drive to Succeed

The whys and hows of BMW

Germany's romance with the automobile is legendary. The country's highways have no speed limit, allowing car owners to unbridle the mighty horsepower of today's steel stallions. Sleek car designs seduce even the most stoic driver to slide behind the steering wheel, continuing a love affair that has a distinct economic advantage. Germany derives around 20 percent of its Gross Domestic Product from auto sales and supply, and "Made in Germany" has long been a symbol of quality. Automobile production, the world's single largest industry, is on the increase internationally, and shows no signs of slowing down. Bayerische Motoren Werke, or BMW, is riding the crest of this recent automotive wave. Its sales and production are on the rise and the company is poised to compete in the world's emerging markets, such as Asia and Latin America. As though to prove its mettle for this global battle, the BMW Group - BMW and Rover, the British auto maker BMW purchased in 1995 - sold over one million cars in 1996. BMW set its own record last year, selling 644,000 cars for a nine percent increase over the previous year, while Rover sold over half a million cars for the first time since 1988. A GIANT'S STEPS BMW is small when compared to giants such as the Volkswagen Group which produced over three million cars last year. While today's mass car builders often own smaller car companies (the VW Group includes Audi, Seat and Skoda) and dabble in other industries, BMW has remained successful by concentrating on its core business, engine production. This deliberate focus has helped BMW to retain a strong corporate identity associated with a successful and desired product. Still, BMW doesn't eschew expansion. Seven years ago, BMW entered into a joint venture with Rolls-Royce to build airplane engines for small and mid-size jets. BMW will also build V12 engines for the next generation Rolls-Royce and Bentley automobiles. The most significant expansion for BMW was the surprise1995 takeover of the Rover Group, Britain's largest and last independent automobile maker. The British company, producer of Rover, MG, Mini cars and Land Rover all-terrain vehicles, was in serious financial trouble after the government privatized and sold it to British Aerospace. While gobbling up a company roughly the same size as BMW may have seemed like a risky step, it gives the BMW Group a firm grasp of an even broader market. BMW Chairman Bernd Pischetsrieder makes the deal sound simple: "British Aerospace was looking to sell, and we were looking to buy." Dave Stubbs, a Rover manager who coordinates dealer cooperation and development, recognizes the benefits of the merger. "You can only stretch a brand so far," says Mr. Stubbs. By adding Rover's compact and off-road vehicles to BMW's line of luxury performance sedans, the BMW Group is able to appeal to a larger market and a greater range of customer tastes. "Great strength comes from the heritage of Rover," adds Stubbs, noting that the British make's recognition with the consumer is an invaluable asset that would take years to build: cars such as the Mini and the Land Rover have become automotive icons over the last 30 years. The benefits of the merger also helped to ease the transition. "The globalization of the industry has been a fact for many years," says Stubbs, "so, once the deal was announced, there was a very positive reaction to it being BMW. There's no nostalgia at Rover for the pre-BMW days." FROM WINGS TO WHEELS For BMW, the joint venture to produce aircraft engines with Rolls-Royce was a return to its roots. Eighty years ago, two airplane engine makers, Rapp Motorenwerke and Otto Werke, merged to form the Bayerische Motoren Werke. The company moved to the Otto Werke factory on Lerchenauerstra├če five years later, still the site of BMW's corporate headquarters. The circular blue and white symbol perched above the 22nd floor of the towering "Four Cylinder" building near the Olympic Park depicts a revolving propeller, a reminder of BMW's beginnings. The 1919 Treaty of Versailles which ended World War I also prohibited BMW from making airplane engines. Instead, the company built bicycles, and in 1923 introduced its first motorcycle, the R 32. BMW produced its first car, the Dixi, five years later. The Dixi was a British Austin 7 built under license in a factory in Eisenach that produced all BMW cars until World War II. In the 1920s and '30s, BMW released several stylish sports coupes and sedans, all bearing the trademark kidney grill. BMW bolstered its sporty image as a producer of "ultimate driving machines" with numerous motorcycle and auto racing successes throughout the 1930s. A PHOENIX FROM THE ASHES World War II left BMW's factories ravaged by Allied bombs while most serviceable machinery was confiscated for war reparations. The Soviets took the Eisenach factory, and another factory in Allach near Munich served as a US military motorpool into the 1950s. BMW resumed bicycle production using machine tools and parts borrowed from other suppliers and introduced its first postwar motorized vehicle, a one-cylinder motorcycle, in 1948. By the 1950s, BMW began to challenge rival Mercedes, producing the 501 and 502 sedans, powered by the first V8 engines in postwar Germany. But the cumbersome sedans were not enough to keep BMW cruising in the fast lane. What it needed was an easily produced car for mass consumption. In the 1950s, bubble cars - small, round and affordable - were all the rage. BMW's response to this fad was the Isetta, a car with only one door at the front and a motorcycle engine. It accounted for almost half of BMW's production during its model run from 1955 to 1962. The 1600, an inexpensive and sporty four-door sedan, following the Isetta and propelled BMW from the position of trend follower to that of trendsetter. The car bridged a gap in BMW's model line between compacts and larger luxury sedans, creating a market niche for mid-size sports sedans. BMW dominated this segment through the 1960s and 1970s, paving the way for the 5 series, introduced after the 1972 Munich Olympics, and the 3-series coupes, which appeared three years later. The successive generations of BMW 3- and 5-series cars, the company's best selling models, are still benchmarks in their respective classes, while the luxurious 7-series sedan, 8-series coupe and Z3 roadster are image machines projecting panache and class. "BMWs are unique automobiles designed and built for a clearly defined, exclusive clientele the world over," said CEO Pischetsrieder in a 1995 speech at Cambridge University. "BMWs are not cars built for everybody, but rather are cars desired by everybody." BMW DESIGN It takes about four years to design each new BMW model from drawing board to production, and the company staggers the release of new automobiles to keep its model line fresh. This means steady work for the 6,000 employees at the Research and Engineering Center, or FIZ (Forschungs- und Ingenieurzentrum), in northern Munich. Completed in 1986, the FIZ is a think tank for designers, engineers, purchasers and testers. The work at FIZ is aimed at keeping BMW's production cars one step ahead of the competition. Security is tight, especially in the design department, the nerve center masterminding the image of the next generation BMW. Designers, engineers and production planners coordinate their efforts to guarantee perfect harmony between style and technology. There is a deliberately strong family resemblance among the different models in BMW's current line. It's hard to tell one from another, but the important thing is that the car is clearly recognized as a BMW, regardless of what model it is. "The BMW product image is a positive influence on the design," says Don Cammorata, a Californian in the motorcycle division. "Design is an international language. It has to appeal equally to many cultures." The BMW design philosophy combines form and function into a seamless whole. The design team integrates style and engineering into a package that embraces modern technology and performance and projects BMW's individuality. "We have a design heritage to maintain," says Erik Goplen, designer of the next generation 3 series. "It's much more of a challenge," he says about creating a new car while integrating BMW's trademarks, such as the double headlamps and the "Hofmeister Eck," the subtle curve in the lower corner of each rear side window. "You want to identify what is valuable in the heritage and hang onto it," says Goplen. INSIDE BMW The concepts and models created by the design team are transformed into vehicles in BMW's factories. The company's largest plant, with 21,000 employees working three shifts per day, is at Dingolfing in lower Bavaria. On average, the Dingolfing plant's mostly automated production process takes two and a half days to complete each of the 200,000 5-, 7- and 8-series cars produced there annually. The first phase of production is the press that stamps raw steel into recognizable auto parts. The parts are then treated with the first of several coats of paint before being welded together. Robots move the pieces from machine to machine in a series of precise, staccato movements while unmanned carts run on guide rails delivering body panels around the factory. The plant's human staff is mainly responsible for quality control, ensuring that edges are smooth and angles straight. The assembly line is where the production, planning and parts are synthesized into the final product. Along the line, workers attach doors to bodies, link engines with axles, match interiors and mount tires until the car can drive off the line under its own power. The other principal car factories are in Munich, Regensburg and Spartanburg, South Carolina. Construction of the Spartanburg plant began in 1992, and, after initial start up problems, the first BMW 318i rolled off the assembly line in September 1994. The factory is now the sole producer of the Z3 roadster. Engines and drivetrains are shipped from Germany to be mounted in Spartanburg where the plant's 1,900 employees rely on more than 10 local supply companies to provide them with the parts for the roadster's body and interior. By the end of 1995, BMW had invested $600 million, a big boost to the local economy and an important foothold for BMW in North America. Visit BMW on the Web. Figures for the first half of 1997 already indicate that BMW will break its 1996 sales records. With new models and innovations being introduced each year, there is no end in sight to BMW's assault on the world car market. The success of the next generation 3 series will indicate the company's ability to dominate an already saturated market and fan the flames of the enthusiast's love for the automobile. As designer Goplen says, "we've got to keep BMW where it belongs. At the top."

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