Politics behind the Scenes
While the 700 was well received at the September 1959 Frankfurt Show and orders poured in, the financial situation continued to deteriorate. Daimler-Benz wanted to buy BMW and turn the plant into a parts-making facility. A deal was struck with management for what was called a merger but, in fact, was an acquisition. BMW wasn’t really a competitor of Daimler-Benz at the time; they just needed capacity. Financing had been arranged through Deutsche Bank.
The fateful board meeting occurred on December 9, 1959. The proposed purchase by Daimler-Benz was supported by management but opposed by the smaller shareholders, the unions and the dealers. The dealers would, after all, lose their BMW franchise when the company was absorbed into Daimler-Benz.
There was also some skullduggery that has never been explained. The development costs for the 700 should have been capitalized and written off over time. Instead, they were all expensed in 1959. The board meeting occurred in December, before the year-end audit might have uncovered this. The Daimler-Benz offer had a very short period for acceptance. And management neglected to disclose the 25,000 firm orders that had been received from their dealers. Clearly management was trying to make the deal happen.
The attorney for the dealers got the decision on the offer delayed, which effectively killed it. The problem of the company being undercapitalized remained. The Quandt family was the biggest BMW shareholder and had been in favor of the Benz offer initially. But they were impressed by the workers and the dealership network and switched their standing to favoring an independent BMW.
Subsequently, the Quandts recapitalized BMW so that orders for the 700 could be met. More importantly, they also invested sufficient amounts to allow development of the New Class, the car that set a new direction for the company and the predecessor of every modern BMW.
So did the 700 save BMW? At the very least, the Isetta and then the 700 bought the company time until the Quandt rescue. The Quandt family, now 60 years later, still owns 46.6 percent of BMW’s stock.
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