BMW didn't fail, it was all down to Williams.
Some of the power plants that were under development in house at BMW were exotic and very promising:their 1991 E41 'experimental' F1 engine was a 3.5 litre V12, 5 valves per cylinder and 3 cams per bank. Lot of power but perhaps too complex.
The next version (E41/1) to come out of the E90 shop reverted to 4 valve twin cam heads for the same output and less weight.
By 1998 BMW were finalising the E41/2 3 Litre V10, again with the 4 valve twin cam heads and very compact, the base design to be used by Williams.
Track testing of the E41/2 began in April 1999.
Head and Williams did not want any 'outsiders' involved in the business as partners, let alone as shareholders, so they constantly rebuffed BMW on that subject, then attempted to blame BMW for the poor performance of their cars.
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