The Rover Takeover: An object lesson in benefits of shock treatment: The Survivor

THE CAR company was close to the end. It had produced a string of unsuccessful models, it was financially overstretched and a powerful rival was bidding to take it over.

The company was Bayerischen Motoren Werke, the year was 1959 and BMW was living through its darkest hour. The story of how it recovered to become the 35th biggest company in Europe and its most successful car maker is an object lesson in the benefits of shock treatment.

BMW started life in Munich in 1917 as an aero-engine maker. After the First World War it turned to motorcycles and in 1928 had its first encounter with the company that is now Rover, producing a rebadged Austin Seven.

In the Thirties its own designs gained a formidable reputation. The six-cylinder 328 was the fastest production car in the world and gathered trophies by the dozen.

In the Second World War BMW switched back to aero-engine production - it used slave labour from Dachau and after the war was almost closed down by the Allies. But it survived, and in 1952 produced a new large car, the 502. It flopped.

BMW's managers responded by moving to the bottom of the market, building bubble cars under licence from Isetta of Italy. But by the end of the Fifties the company was in crisis and Daimler-Benz was waiting to pounce.

At a crucial shareholders' meeting in December 1959 an unlikely white knight emerged. Herbert Quandt, the near-blind scion of the Varta battery family, took control. He brought in Paul Hahnemann, a marketing man who decided BMW needed a niche in which it could grow.

Harking back to the company's racing history, Hahnemann used his marketing skills to create the BMW image of today.

Since then, according to Garel Rhys, of Cardiff Business School, 'BMW never made a serious mistake again'.

It also benefited from remarkable continuity. The Quandt family is still in control and BMW has had three chairmen in 35 years.

In the Eighties the BMW image struck a chord with the times. The Three Series, launched in 1982, was a yuppie's dream - sleek, wicked and faintly impractical.

The two most recent launches, the new Five and Three Series, have each been acclaimed best car in its class.

Though BMW has not been able to avoid the cost pressures that come from being German, it has survived more successfully than its old rival Daimler-Benz.

Its secret is a fear of failure combined with a vision of where it is going - a secret it shares with another reviving car company - Rover Group.