Finanzierung von Wiederaufbau und Expansion - Cashflows westdeutscher Automobilhersteller zwischen 1948-1960

Prior research showed that in 1957, the German motor car industry provided 92 percent of its finance by internal ressources. This suggests a generally sound financial basis of German carmakers. However, the picture is misleading. The comparison of net cash flows of Volkswagen with that of BMW proves that corporate finance patterns among individual companies differed starkly. The reason for this was not only a different business policy but also the pre-1948 premises under which each company recommenced its production of cars. At Volkswagen, an assertive general director implemented a succesful economies of scale policy at a large industrial base that due to the historical circumstances was nearly free of cost of capital. On the other hand, BMW due to its substantial war and post-war damages as well as the market failure of its business policy had to rely on increasingly expensive debt. Against this background, Volkswagen was in a much better situation than BMW to benefit from the federal government′s stimulus to self-finance that was based on an expansive depreciation policy. As a result, Volkswagen financed nearly all of its capital expenditure with its operating cash flow, while BMW dragged to the edge of insolvency.