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The Beginning-The Oberwiesenfeld

BMW has two fathers, Karl Rapp and Gustov Otto, both of whom paved the way for further developments in their field. They both left distinct traces during aviation's pioneering days.

Gustav Otto

Interestingly, Gustov Otto was the son of Nikolaus August Otto, the inventor of the four-stroke internal combustion engine. Gustov was an aviator and one of the first flight pioneers in Bavaria. Along with a few others, Gustov flew machines made of wood, wire, canvas and powered by an engine. Through their passion for these flying machines, they helped transform aviation from a do-it-yourself hobby to a genuine industry vital to the military, especially after the breakout of World War I.

Gustov Otto, in 1910, set up a factory called Otto-Flugzeugwerke on Lerchenauer Strasse, east of the the Oberwiesenfeld troop maneuver area in the Milbertshofen district of Munich(this area later became Munich's first airport). Otto received the German aviation license no. 34 in the same year. He concentrated on building Farman inspired pushers (he had got his license on an Aviatik-Farman himself), and soon became the main supplier for the "Bayerische Fliegertruppen". However, he could not get any orders from the Prussian military. This was the reason why he founded the Ago Fluggesellschaft (Ago) in Johannisthal on April 1, 1912. The founding of this company had nothing to do with the fortunes of the mother company. To complicate things further, Gustav Otto also founded the A.G.O. company (for Aeromotor Gustav Otto), which was based in Munich. AGO built aircraft engines and had nothing to do with Ago in Johannisthal (note the different way the names are written). Both the Otto and the Ago companies, which from 1914 developed different aircraft, were not successful in getting in orders. Suffering financially, The Otto company was taken over by a consortium including some banks and on 7 March 1916 was merged with Rapp-Motorenwerke into the Bayerische Flugzeugwerke. Ago closed down in 1918, the facilities being taken over by AEG.

Karl Rapp

In 1913 Karl Rapp established Rapp-Motorenwerke in a few wooden buildings of a former bicycle factory near the Oberwiesenfeld. This new company specialized in airplane engines. After the outbreak of World War I, Rapp started to supply aeroengines to the Austrian army. However, the engines suffered severe vibration problems, causing the military to decline purchasing the poorly performing engines. Rapp would quickly have gone out of business if his main customer, Austrian military forces, had not had Austro-Daimler V12 aircraft engines built here during war under a license. Austro-Daimler at the time was unable to meet its demands to build V12 Aero engines. The Austro-Daimler technical inspector was Franz-Josef Popp, who was delegated to Munich from Vienna to supervise engine quality. Popp was the person who convinced Max Friz, an aircraft engine designer and engineer at Daimler, to come to Munich to assist in development and expansion. Amid over-expansion difficulties, Rapp left the company in 1916, leaving Popp and Friz to run the company. On 7 March 1916 Rapp Motoren Werke (now under Austrian management) merged with Otto-Flugzeugwerke under the newly formed parent name Bayersiche Flugzeungwerke. BFW was born. Both companies were run as separate divisions with the BFW umbrella. BMW AG acknowledges this date to be the beginning of the company we know today.

Bayerische Flugzeungwerke (BFW)

BFW continued their support to the Kaiser war efforts by designing and building airplane engines. With the success of the type III engine, the small company grew very quickly, and on 21 July 1917, BFW was renamed to Bayerische Motoren Werke GmbH (BMW GmbH). BMW opened a glossy new factory on Moosacher Strasse to the north of the airfield. It began operations in 1918 shortly before the end of the war, producing BMW's first engine, type III, and was based on the original design by Karl Rapp. The engine was successful, but the decisive breakthrough came in 1917, when Max Friz integrated a basically simple throttle butterfly into the "high-altitude carburettor", enabling the engine to develop its full power high above the ground. This is precisely the reason why the engine, dubbed "type IIIa", had unique superiority in air combat. The water-cooled in-line 6 cylinder engine's reputation grew very quickly. Ernst Udet was a family friend of Gustov Otto, the leader of Manfred von Richthofen's Jasta 11 in World War I (and later a legendary pilot, aerobatic flyer, and Air Marshal), acknowledged the outstanding performance of BMW's type IIIa engine. "There can be no doubt that the BMW engine was the absolute highlight in power unit development towards the end of the war. The only bad thing about it was that it was too late". The "Red Baron" himself tested the performance of BMW engines under practical conditions in 1918. "In 1919, the pioneering aviator Franz Zeno Diemer sets the airplane altitude record with a 32,000 ft flight. It was a significant technical and competitive accomplishment for the day, but also created the spirit for decades of victories to follow at famous venues like the Isle of Man, Mille Miglia, Le Mans, and Daytona and in Formula 1". This historic flight was achieved only through the brilliance of the type IIIa engine. Diemer stated at the time, " I could have gone much higher, but I didn't have enough oxygen."

With the reputation of the successful engines growing, it was decided to take the company public, in order to provide capitol for future expansion. In 1918, just before the end of The Great War, BMW was converted into a stock corporation with a share capitol of 12 million Reich marks, one-third of which was held by by the business magnate Camillo Castiglioni. Popp, the General Manager of the former limited liability company, was appointed the first General Director of BMW AG.

Shaping a Company

After the war had come to an end, the weapons and machines left over were destroyed or dismantled under the direction of Allied forces, like in other parts of Germany. This is when BMW facilitated the need to produce railway brakes and built in engines. Although it was not what the engineers envisioned, it allowed the company to remain solvent. Not satisfied with building air brakes for railways, the BMW engineers sought new projects to pursue. In 1919 BMW designed its first motorcycle engine, used in a model called the Victoria, which was built by a company in Nuremberg. In time however, three men came together to form a company that was to last, building on the legacy left behind by Karl Rapp and Gustav Otto.

The first man was Franz-Josef Popp, an industrialist. Popp, being an engineer by profession and an excellent administrator, quickly took over Rapp's factory as Director General when Rapp left, making all essential decisions. The second man was Max Friz, also an engineer, who became the Chief Engineer and Designer for BMW. It was Friz who turned the Company's progressive ideas into reality until far in the 1930's. The third man was Camillo Castiglioni, a financier from Vienna. He started his career from scratch and became the owner of no less than 170 companies, one of which was Austro-Daimler, Karl Rapp's former customer. Castiglioni was a very influential man in Germany during World War I, able to exercise his immense influence for his own interests.

Bayerische Motoren Werke

In 1922 Knorr-Bremse AG negotiated a deal to purchase the brake production operation and the facilities of the BMW company. However, Popp was able to persuade Castiglioni to buy (using the BFW company) the name "BMW". Together with Max Friz and his leading engineers, they began engine production after moving into the empty buildings of Gustov Otto's former Otto-Flugzeugwerke, and it is precisely here, on Lerchenauer Strasse 76, that BMW has maintained its roots ever since. The aircraft engine business with Russia secured BMW's success in the 1920s. Meanwhile the competition, Junkers in particular, were confounded as to how BMW was managing to pay out such huge dividends. They conjectured that BMW was the victim of stock market speculation and would soon face bankruptcy. Others made allegations that the Munich company was receiving millions of marks in government subsidies. But all these conjectures were wide of the mark. BMW had merely succeeded in securing Eastern Europe's biggest customer early on: the air force of the Red Army. BMW wasn't the only beneficiary of these business deals with Russia. Sole shareholder Castiglioni was also raking in the money. His deals with Russia were once again conducted through his bogus companies. As an alleged brokerage fee, ten percent of the gross price of each aero-engine delivered to Russia found its way into Castiglioni's pocket. In 1926, the financier from Vienna had to transfer over his majority shareholding to Deutsche Bank to resolve his financial difficulties, but he continued as a major shareholder of BMW.

Deal with Russia

The “commission payments” to Castiglioni's companies continued until 1928, when an informer tipped off Deutsche Bank about Castiglioni's unusual accounting methods. The bank had his accounts investigated retrospectively. End of the Russian business relations To avoid a court case, Castiglioni made a substantial payment of one million reichsmarks to BMW. As a result of these disturbing revelations, he was no longer tenable to hold a position as a member of the Supervisory Board. When he ran into financial difficulty once again, Deutsche Bank managed to buy the remaining BMW shares from him. The Castiglioni era came to an end in 1929. Since he had come on board in 1922, BMW had burgeoned and flourished. Successful motorcycle production had been established, the company had embarked on car production with the purchase of the Eisenach Car Factory in 1928, and thanks to the Russians, aeroengine manufacturing had been revived with considerable profit. But these achievements were not so much owed to Castiglioni as to BMW's General Manager, Franz Josef Popp. The “Castiglioni affair”, needless to say, had repercussions on the Russian business. The Russian commercial agency in Berlin became aware of the high commission payments and felt ten percent too much had been paid for years. Arbitration proceedings led to an agreement that BMW would agree to give the Russians the license for the BMW VI aero-engine free of charge. In the aftermath, BMW tried desperately to win new contracts from the Soviets, but this was unfortunately not to be. And so 1931 marked the end of this lucrative Russian deal for BMW.

BMW branches out

In 1924 BMW built its first model motorcycle, the R32. This had a 500 cc air-cooled horizontally-opposed engine, a feature that would resonate among their various models for decades to come, albeit with displacement increases and newer technology. The major innovation was the use of a driveshaft instead of a chain to drive the rear wheel. For decades to follow, the shaft-drive boxer engine was the mark of the BMW motorcycle.

In 1927 the tiny Dixi, an Austin Seven produced under license, began production in Eisenach. BMW bought the Dixi Company the following year, and this became the company's first car, the BMW 3/15. By 1933 BMW was producing cars that could be called truly theirs, offering steadily more advanced I6 sports and saloons (sedans). The pre-war cars culminated in the 327 coupé and convertible, the 328 roadster, fast 2.0 L cars, both very advanced for their time, as well as the upscale 335 luxury sedan.

World War II

BMW also has a Nazi past which should be made public. According to its own investigations and the affidavit of Karl Sommer. Sommer was an SS officer working in the Economic and Administrative Main Office (EAMO) in 1942, becoming its departmental head in 1944. EAMO was responsible for giving companies access to prisoners for slave labor.

After the war, Sommer was interviewed by the US Chief of Counsel on his activities under the Nazi regime, and specifically, about which companies used Nazi slave labor. Sommer said that the firms, after filling the necessary prerequisites, were allowed to come in to the camps and choose the prisoners they wanted. Even after seeing the horrible conditions in these camps, seeing the death, starvation, torture... these firms chose to take some of these people and exploit them for profit. Most were worked to death.

The first such firm named on Sommer's list is BMW, which makes 4 further appearances on the list. Altogether, BMW admits to using to using 25,000 - 30,000 slave laborers, POWs and concentration camp inmates. If they were paid, their meager earnings (20 cents an hour) went into the SS treasury to further fund their own annihilation (information from The Ethnic Newswatch 03.31.98). Other firms listed by Sommer include Volkswagen, Krupp, Siemens, Bayer, Porsche and Daimler-Benz (Mercedes).

Sommer's affidavit (Document No. NI-1065) is now on file in the National Archives.