BMW Group (Germany)

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BMW has successfully set the benchmark for prestige motoring since the 1980s, creating a standard now fiercely contested by other manufacturers such as Mercedes, Lexus and Audi. Meanwhile, the group has diversified. Having finally pulled the plug on its disastrous 1990s dalliance with Rover, the group now offers only the enormously successful relaunched Mini at the lower end of its range, and ultra-prestige Rolls-Royce marque at the top. Just as important has been the expansion of the core BMW marque with new models including the entry-level 1 series and the hugely popular X-series SUV range. It is the only volume automobile manufacturer to concentrate exclusively on the premium passenger car sector. This has allowed performance to soar, largely unencumbered by the continuing drag effect of the struggling European mass-market automobile sector. BMW Group celebrated its 100th anniversary in 2016.

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Recent stories from Adbrands Weekly Update:

Adbrands Weekly Update 18th Jan 2017: President-elect Trump was back onto the automobile sector again this week, starting a row with Germany with typically uninformed remarks about, among other things, German automobile manufacturers. In a joint interview with The Times of London and Germany's Bild, he asked why German cars were so popular with Americans, singling out BMW and Mercedes-Benz in particular, while Germans themselves, he said, don't buy Chevrolets. He proposed a 35% tax on every car BMW imports into the US, and suggested it build a plant in the US instead. Needless to say, BMW already does have a factory in the US, as does Mercedes, and Germans don't buy Chevrolet because that brand is no longer sold in Germany. They do, however, buy the Opel brand - also owned by GM - as well as Ford. But despite Trump's typical errors, his underlying message at least was clear, and was reiterated in a subsequent tweet: “Car companies and others, if they want to do business in our country, have to start making things here again. WIN!” His provocative strategy clearly works. Following Ford's recent decision to scrap plans for a new Mexican factory, and a promise from Toyota to boost US investment by as much as $10bn, other carmakers have scrambled to follow suit. This week, GM announced an additional investment of $1bn in the US, including the transfer of production of axles for a new truck from Mexico. Hyundai said it will increase spending by 50% over the next five years to a value of over $3bn.

Adbrands Weekly Update 5th Jan 2017: Sales volumes for 2016 showed the US auto industry reaching a new record of 17.55m vehicles sold (up from 17.47m in 2015). That marks a strong recovery from the lows of the 2008 crisis, when sales dropped below 11m. However the banner figures mask troubles lying just below the surface. As Ford's announcement reflected, sales of small and midsize cars have slowed dramatically, despite surging demand for SUVs and pick-ups, leaving all manufacturers with sizeable quantities of unsold inventory. This is expected to impact significantly on profits in the year ahead. Another worry is that the growth was experienced mainly by smaller companies, rather that the big manufacturers, most of whom suffered small declines on the year. GM reported annual sales of 3.04m cars, down just over 1%, while Ford fell marginally to 2.60m. Fiat Chrysler was down by 0.4% at 2.24m, and despite a strong final month Toyota too was down 2% over the year as a whole to 2.45m. The single biggest decline was suffered by BMW, down by just under 10%, compared to a fall of just 3% for Volkswagen Group. The VW brand alone fell by almost 8%, offset by a 4% increase for Audi. The single biggest gain by any manufacturer was notched up by Tesla, with sales soaring by 69%, though total volumes were still tiny at under 40,000 vehicles. There was double-digit growth for Jaguar Land Rover and Volvo, and a mid-single-digit uplift for Nissan, Honda, Subaru and Kia.

Adbrands Weekly Update 15th Dec 2016: Mercedes-Benz is set to topple BMW's decade-long reign as the world's top-selling luxury car brand. By the beginning of December, Mercedes was already almost 70,000 vehicles ahead of BMW, and nearly 180,000 ahead of Audi. This will be its first year back in the #1 spot since it lost the lead to BMW in 2005; and was subsequently overtaken by Audi as well. Key to its stellar performance has been the strong demand for its all-new SUV launches, such as the GLC model.

Adbrands Weekly Update 27th Oct 2016: Ads of the Week: "The Escape". Wow. BMW revolutionised viral content 15 years ago with its BMW Films series, co-created by Fallon, and starring the effortlessly cool Clive Owen as "Driver". Owen is back in the driving seat for this long-overdue follow-up directed by Neill Blomkamp (the movies District 9 and Elysium). Co-creator David Carter, then at Fallon, now independent, is back too as producer, and there's an excellent supporting cast. Plus some extraordinary action sequences. Prodco is Anonymous Content. Imagine a 90 minute chase movie boiled down to its 10 minute essence. You won't see a better ad - or indeed movie - this month.

Adbrands Weekly Update 19th May 2016: German media outlets identified Hildegard Wortmann as the new chief marketing officer of BMW Group, taking over from Steven Althaus, whose departure was announced last month. She becomes the first woman to lead BMW's marketing department, and one of very few senior female marketers in the global auto industry. She was previously group SVP, product management & after sales.


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Background

Free for all users | see full profile for current activities: BMW began life during the First World War as an airplane manufacturer, Rapp Motorenwerke. Founder Karl Rapp's main interest was aircraft, and more specifically the engines that powered them. However he renamed the business Bayerische Motoren Werke (or Bavarian Engine Works) at the end of the war, and introduced the company's now-familiar logo at the same time, a stylised representation of an aircraft propeller. Flying became a major preoccupation of the 1920s, as pilots and manufacturers set out to top each other's records for speed or distance. In 1927 alone, pilots flying BMW-powered planes broke 27 world records. As a sideline, BMW began to develop its engines for land speed also and in 1923 launched its first motorcycle. This proved a lucrative add-on business, and after the company rescued failing auto maker Fahrzeugwerke Eisenach in 1928 it began to manufacture cars as well. The first BMW automobile was the compact Dixi 3/15, launched in 1929.

The auto business flourished during the 1930s, fuelled by the new high speed autobahns commissioned by the Hitler government. To coincide with the Berlin Olympics in 1936, the company launched its hugely successful BMW 328 sports car, which subsequently became a regular winner in European motor-races. However, as the prospect of war grew, BMW turned its attention back to aero engines, commissioning two new factories in 1937. Car production was halted altogether after the start of World War II, although the company continued to make motorcycles, mostly for military use. In 1944, the company was closely involved in the development of the first jet engines, and was involved in the design and production of the V1 and V2 rockets. As a result, BMW factories were a key target for Allied bombing, and were destroyed in 1945.

Immediately after the war, the company was prohibited from manufacturing engines by the Allied occupation forces, and spent three years making kitchen equipment instead. Finally in 1948 BMW was allowed to restart production of motorbikes, with cars following in 1950. The first post-war automobile, the 501 Sedan, was launched in 1951 but it proved a disaster, too luxurious and expensive for the still-impoverished German market. The tiny Isetta bubble car launched in 1955 was a modest success, and the company subsequently tested a few sports models, but its debts spiralled rapidly. By the end of the decade BMW was close to collapse. Arch-rival Daimler-Benz offered to take the factory over but said it would drop the BMW name in favour of its own Mercedes marque. The company tried to attract interest from foreign manufacturers such as Ford and General Motors but with little success. 

Rescue came from industrial heir Herbert Quandt. His father Guenther had acquired Varta, the German manufacturer of automobile batteries in the 1920s, and later invested in BMW and other businesses. In 1960, Herbert Quandt funded a buyout of BMW by its management and staff in return for a 46% stake. Following a revival of the business in the 1960s with a range of mid-price family models, Quandt appointed Eberhard von Kuenheim as managing director of BMW in 1970. Von Kuenheim was the architect of the group's subsequent repositioning as a maker of prestige automobiles, in direct competition with Daimler-Benz.

In 1972, the company launched the premium BMW 5 series to coincide with the second Berlin Olympics. The same year, it opened its first overseas factory, in South Africa. In 1973, BMW set up in France and made its first inroads into the US. But the real breakthrough came with the launch of the 3 series in 1975, followed by the luxury 7 series in 1977. Both targeted the affluent business market, making the label "Made in Germany" a status symbol for the first time. The economic boom of the 1980s sealed BMW's success, particularly in the US, where "Beamers" became the archetypal yuppie status symbol.

By 1990, the year East and West Germany were reunited, BMW was producing more than 500,000 cars and 30,000 bikes a year. The company also teamed up with Rolls Royce to manufacture jet engines. By 1993, with the announcement of plans to build the company's first factory in the US, the group was operating at peak strength, and was itching to diversify. A year later, Von Kuenheim's successor Bernd Pischetsrieder announced the £800m acquisition of Rover Group, the UK's last major motor manufacturer which controlled a collection of brands including Rover, MG, Land Rover and Mini (see Rover Group profile for more). This appeared to be a huge boost for BMW, almost doubling the group's car production. But within a year, performance at Rover had slumped. In 1995, the company slipped from breakeven to a loss of over £150m. In 1996 BMW more than doubled annual investment in the company to £500m and installed an experienced BMW veteran as chief executive. The following year, after a modest improvement in Rover's sales, investment was increased by a further £700m, but sales continue to fall during 1998.

BMW's chairman met with fierce criticism from both shareholders and senior managers, led by sales and marketing director Wolfgang Reitzle, for continuing to back Rover. Finally, after a tense, day-long board meeting in February 1999, both Pichetsrieder and Reitzle were forced to resign in order to heal the damaging divisions within the company. In fact, the true size of the problem didn't emerge until a month later, when BMW finally unveiled a loss for the year at Rover of £645m, more than seven times worse than the previous year. 

It was a disappointing conclusion to what had otherwise been a good year for BMW. The company's own cars and motorcycles set new records in sales and profitability in 1998, despite a downturn in key Asian markets. Better still, BMW had beaten Volkswagen in a race to win another British carmaker, Rolls Royce. VW outbid BMW for the Rolls Royce and Bentley car manufacturing business, which it acquired from Vickers for £480m, but apparently failed to realise that the Rolls Royce name and logo were only held under license by Vickers, and in fact still belonged to a separate company, the engine manufacturer Rolls-Royce plc. Rolls-Royce sold the automobile license to BMW for £40m, forcing VW to surrender control of the marque to BMW at the end of 2002. 

As a result of its Rover troubles, other international auto manufacturers were now beginning to put pressure on the Quandt family to sell BMW, forcing its new chairman Joachim Milberg to look for additional ways to cut costs. In 1999, the group threatened to shift Rover production from the UK to Hungary unless the British government invested additional financial support. This led to some hardball negotiating between BMW and the government, but the German group ultimately got its extra funding. However the deal was delayed for months when EU regulators insisted on investigating the validity of BMW's threat to shift the business. Meanwhile Rover's sales continued to fall. BMW's patience finally ran out in March 2000 when another record year for the BMW marque was cancelled out by a catastrophic fall in sales at Rover. In a second marathon board meeting, a year after the removal of Pischetsrieder and Reitzle, three further board members were ousted and BMW confirmed it would sell both Rover and sister brand Land Rover.

Even this deal seemed doomed. Negotiations with the preferred bidder, investment group Alchemy Partners, stalled over terms. Finally rival bidder Phoenix acquired Rover's factory at Longbridge for just £10, and BMW effectively loaned Phoenix a further $500m towards redundancies and restructuring. BMW retained ultimate ownership of the brandname but agreed to license it to Phoenix for at least seven years. Land Rover was sold separately to Ford for a rather more lucrative E3bn. BMW kept hold of Mini, the only redeeming feature from its six unhappy years as the owner of Rover. A year later the new Mini launched successfully in Europe later that year, receiving general acclaim for its stylish redesign.

The Mini was originally conceived as a British equivalent to the Volkswagen, a "people's car" which would appeal to the hearts and pockets of ordinary people. Another major consideration was the return of petrol rationing in the wake of the Suez crisis of 1956, which led to a sudden spike in sales of small imported "bubble cars", and a slump in sales of larger models. The project was initiated in 1957 by Leonard Lord, chairman of what was then the British Motor Corporation. It was assigned to Alec Issigonis, the designer and engineer who had also been responsible for creating BMC's very popular Morris Minor a decade earlier. A key feature of the new car's design was its clever sideways-mounted engine and front-wheel drive, which allowed the maximum amount of floor space to be allocated to the passenger compartment. For ease of use, the compact hatchback boot was designed with hinges at the bottom rather than the top, so that it could be left open for driving if necessary.

The first cars went on sale in 1959. Virtually the same design was marketed under BMC's two main brands of Austin and Morris, as the Austin Seven and Morris Mini-Minor respectively. Separately, a more powerful version of the car was commissioned from racing engineer John Cooper, originally as a limited edition. Introduced to the general public in 1961, it was sold as the Mini Cooper, and quickly earned itself a reputation for pluck and endurance as a result of its showing in a series of racing rallies.. Another alternative model was the Austin Countryman (or Morris Mini Traveller), introduced in 1960. It featured wood framing on the exterior (as well as distinctive green paint job) and double doors at the back instead of the hatchback boot.

Eventually the dual identity of Austin and Morris was abandoned, but not until 1969. By that time, the Mini had attracted even greater fame as one of the most widely recognised symbols of the new "swinging" London. It was popularised by actors and fashion models, and its status was greatly enhanced in 1969 by a starring role in comedy crime movie The Italian Job. The climax of the film featured a spectacular bank robbery in the crowded streets of Milan, performed by a fleet of stunt-driven Mini Coopers. Also in 1969 the company, now British Leyland, introduced another new design variant, the extended-length Mini Clubman.

Over the next 30 years, the Mini continued to be one of the declining British motor industry's most enduring cars. A series of further variants were produced by British Leyland and its various successor companies. However, Leyland itself shrank to become the Austin Rover Group in the 1980s, and then simply Rover Group. In 1994, the business was acquired by BMW. The iconic status of the Mini had been one of Rover Group's key selling points, and BMW soon began to consider a full relaunch of the brand featuring a new design which reflected the heritage of the Mini but gave it a fresh and modern new look. The project was placed in the hands of Frank Stephenson, an experienced BMW engineer who had also worked on the launch of company's X5 SUV. A prototype design was unveiled in 1997, but execution of the new design was consistently delayed by the severe financial problems experienced by the rest of the Rover business. In the mean time, production of the original Mini continued - the last of the old models came off the production line in 2000. The new Mini was finally launched the following year to a rapturous response. In a neat update of its 1960s heritage, a remake of the Italian Job movie was released in 2003, in which the heist was pulled off by a team of new Minis. See full profile for current activities


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