The story
Formation
Auto Union was formed in Germany in 1932 merging:
Zschopauer Motorenwerke J. S. Rasmussen (brand DKW – steam-driven car) founded by Danish engineer Jørgen Skafte Rasmussen in 1916, it branched out into motorcycles, and then front-drive two-stroke cars built at Audi works in Zwickau since 1931.
Horch – founded 1904 by August Horch in Zwickau. It built cars starting from straight-twin engines to luxury models with V8- and V12 engines.
Audi – because of disputes with the CFO, August Horch in 1909 left his namesake enterprise and founded Audi across town, building inline-four-, six- and eight-cylinder-engined cars. In 1928 Audi became a subsidiary of Zschopauer Motorenwerke.
Wanderer (car division only) – founded in 1911, with small four-cylinder cars and later a more luxurious straight-6 built in Siegmar (now Chemnitz)
In August 1928, Rasmussen, the owner of DKW, acquired a majority ownership of Audiwerke AG. In the same year, Rasmussen bought the remains of the US automobile manufacturer Rickenbacker, including the manufacturing equipment for eight- and six-cylinder engines. These engines were used in Audi Zwickau, Audi Imperator and Audi Dresden models. At the same time, six-cylinder and four-cylinder (licensed from Peugeot) models were manufactured.
In 1930 the Saxony Regional Bank, which had financed Rasmussen's business expansion in the 1920s, installed Richard Bruhn on the board of Audiwerke AG, and there followed a brutal pruning and rationalization of the various auto-businesses that Rasmussen had accumulated. The outcome was the founding in Summer 1932 of Auto Union AG with just four component businesses, being Zschopauer Motorenwerke with its brand DKW, Audi, Horch and the car producing piece of Wanderer, brought together under the umbrella of single shareholder company Auto Union. Although all four brands continued to sell cars under their own names and brands, the technological development became more centralized, with some Audi models employing engines by Horch or Wanderer.
Background
Auto Union chairman, Klaus, Baron von Oertzen, wanted a showpiece project to announce the new brand. At the 1933 Berlin Motor Show, German Chancellor Adolf Hitler announced two new programs:
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The people's car (Volks wagen): a project that became the KdF car – the "Strength through Joy" car
A state-sponsored motor racing programme: to develop a "high speed German automotive industry," the foundation of which would be an annual sum of 500,000 ℛ︁ℳ︁
At fellow director's Adolf Rosenberger insistence, von Oertzen met with Dr. Ferdinand Porsche, who had done work for him before, and developed his own P-Wagen project racing car based on the new 750 kg (1,650 lb) formula.
German racing driver Hans Stuck Sr. had met Hitler before he became Chancellor, and not being able to gain a seat at Mercedes, accepted the invitation of Rosenberger to join him, von Oertzen, and Porsche in approaching the Chancellor. In a meeting in the Reich Chancellory, Hitler agreed with Porsche that for the glory of Germany, it would be better for two companies to develop the project, resulting in Hitler agreeing to pay £40,000 for the country's best racing car of 1934, as well as an annual stipend of 250,000 ℛ︁ℳ︁ (£20,000) each for Mercedes and Auto Union. (In time, this would climb to £250,000.) This highly annoyed Mercedes, who had already developed their Mercedes-Benz W25; nevertheless, Mercedes was gratified, its racing program having financial difficulties since 1931. It resulted in a heated exchange both on and off the racing track between the two companies until World War II.
Having garnered state funds, Auto Union bought Porsche's Hochleistungsfahrzeugbau GmbH (HFB) (High Performance Car Ltd.) and hence the P-Wagen Project for 75,000 ℛ︁ℳ︁, relocating the company to Auto Union's Horch plant at Zwickau.
From Wikipedia’s article on Auto Union, shared under CC BY-SA 4.0.4