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We approach the corner–it seems too fast. My body tenses up in the passenger seat. I scramble to visualize the best path through the twisting gravel turn ahead, and shift my weight accordingly to anchor myself. 

The car ignores the fast-in, fast-out racing line that I had mapped out in my head. My imagined apex is meaningless. Instead, the front end digs in, the rear rotates out, and suddenly we're pointed at the exit of the corner before we've entered it. We shoot straight out of the exit, with all four tires spitting out gravel in our wake. 


I'm the world's worst rally co-driver in an M3-powered BMW 325xi that's been tweaked, tuned, and rebuilt to do a very specific thing: bomb through scenic gravel roads, hours away from civilization, guided by the hands of its owner, Daniel Sloan.

I'm struck by how this seems so natural to him and so unnatural to me. My brain is forced to accept this alternate reality where the physics of radial rubber on pavement don't apply. Where lifting off of the throttle has more effect than pressing it, and the steering wheel merely suggests a change of direction rather than commanding it.  


In the northeastern corner of the state, we're in Troy, Oregon, ripping down a 50-mile gravel loop that winds through forested hills, golden valleys, and sparkling rivers. It's one of a half-dozen destinations that Sloan has plotted out for us to take the all-wheel drive M3 wagon, love/hate'ingly called the "M3baru," to put it to the test. Sixteen hundred miles, crisscrossing Oregon, devoted only to hunting down challenging roads and trails, rallying to beautiful places for sunrise and sunset.

This would be a redemption tour for the M3baru. It has a lot to atone for. 

Read Part 1 Of The E46 M3XI's Story



Mission Statement

In March 2019, Daniel bought this all-wheel drive M3 wagon in Denver, and I helped him drive it from Colorado to Portland. He immediately brought it to Rhom Innovations to sort out annoyances and begin converting it from a lowered, grippy track weapon into the all-weather rally wagon that you see here. 

Initially, Rhom changed the wheels and tires, raised the suspension, and took it for a drive. "It did way better than I thought," Rhom recalled. "I thought it was going to have all kinds of crazy bump steer." 


It turns out the BMW E46—one of the best small sedans ever made—was a great starting point for something like this. "They did an outstanding job on the suspension geometry from the factory," Rhom explained. Other car manufacturers add all-wheel drive to their cars, but it's a completely different subframe on the BMW. It's different control arms, different pickup points, the strut towers are a little different, the steering rack—everything's designed around the all-wheel drive."


A Brand New S54


Our last epic road trip in the M3 wagon ended five days early, on the back of a flatbed. We would learn that the swapped S54 motor suffered from poor oil flow, directly related to the all-wheel drive refit. In all-wheel drive BMWs, the axles go through the oil pan, enabling the longitudinal inline-six to be mounted low in the chassis. When paired with an S54 from the rear-wheel drive-only M3, some unexpected issues crop up. 

"When they put the all-wheel drive oil pan on the [S54] engine," Sloan's mechanic, Chris Rhom explained, "the oil pump didn't have clearance—so the actual oil pump gear and chain were grinding through the front of the oil pan. It filled the engine up with really fine aluminum dust. The galleys became plugged up with aluminum powder." 

Had it been iron or steel shavings, the bearings would have been ruined immediately, but the soft aluminum dust accumulated over time, building up over hundreds or even thousands of miles. 


"The bearing was overheating, and the crankshaft was overheating," Rhom continued. "There was enough oil to keep it spinning, but not enough to cool it off. What failed was the very last rod bearing; it was the last one to get oil."

Rhom Innovations tore the motor apart, addressing all of the problem areas, starting with the crankshaft. Those are sent to Long Beach, CA, to be straightened, heat-treated, and re-nitrided—a process that hardens and strengthens the metal. BMW crankshafts are nitrided from the factory, which Rhom credits with saving us from a more explosively catastrophic engine failure. "How long did the rod knock in that thing?" he asks. "Any other car would have thrown the rod through the side of the block."

Addressing the troublesome oil pan required cutting up the all-wheel drive oil pan to fabricate a new one with correct clearances, as well as putting in baffles as an additional safeguard. 


The S54's cast-iron block was fine. New bearings went on the remanufactured crank, with new aftermarket pistons and rods. Rhom said the top end was spared from carnage because "S54s have a ton of filters and screens for the oil that goes up to the head. The VANOS has such small passages already." After cleaning, pressure testing, and resurfacing, the head was reused. 

Once the motor was rebuilt, more issues were found throughout the reinstallation, including realizing just how crudely the wiring harness had been hacked together by the original builder. "With this car," Rhom says diplomatically, "some of the prior processes had to be undone or redone."

An M3 fuel pump replaced the 325 unit, and a wideband air/fuel ratio gauge was installed to help tune the S54. It had been broken in over a couple hundred miles before our trip, and while there were still a few minor teething issues to address, it was deemed ready for the sixteen hundred miles ahead.


On and Off-road Manners

On pavement, the M3baru drives more or less like how you would expect an M3 to drive, only on 17-inch all-season tires, which became progressively more chewed up as our trip went on. Gripping the fat-rimmed steering wheel and hearing the silky hum of the S54 in an E46 M3 always gives me a warm, familiar feeling, and the M3baru is no different. When it's my turn to drive, I'm immediately put at ease by the M3's unique combination of road feel, smoothness, precision, and power. Entering a turn, I'm probably only using 50% of the available grip, but I know that if I've completely misjudged it and need to add more steering, the car will do whatever I ask of it, predictably, every time.


On gravel, it's a little different due to my own unfamiliarity with loose-surface driving technique. To me, it feels like driving on ice, with longer stopping distances and delayed inputs. Sloan tries to instruct some of the techniques he learned at the DirtFish Rally School: 1) Lift off throttle, 2) Turn the wheel, 3) Wait for inputs to take effect, and get back on the power. 

But it doesn't click; it's counterintuitive. I'm fighting my brain. You need to charge into the corner on the power for the lift-off weight transfer effect to work, and I'm not confident enough to go fast enough. Go slow in, and you're stuck with slow out. This will require further study.

Thankfully Sloan knows what he's doing. Compared to the turbocharged Subaru WRX STIs he's driven, he finds the naturally aspirated S54 much more predictable. "It has more power – linear power. Obviously, it didn't have actual gravel tires on it, and the amount of suspension travel is a lot different, but it drove similarly."


Besides the power curve, the biggest difference is the 38% (front)/62% (rear) power split, compared to the 50/50 split of Subarus. "You do get a little bit of the oversteer once you're back on the throttle coming out of the corner, and in the STI, you didn't get that at all: it was understeer or straight. I wouldn't say this is better, necessarily; it just makes it feel a little bit of a rear-wheel drive car. And it's less prone to understeering, also probably because it has an open front differential, so you're not getting as much traction pulling out of a corner on the front end as you are in the back."

Without a doubt, the 3.91 differential ratio improved the total experience and made the M3baru more drivable in more gears. The S54 isn't known for being particularly torquey, but managing slides in lower RPMs in third gear proved to be the smoothest approach compared with second gear. 


Hat Point


We got up at 5:00AM to drive to Hat Point—a peak that's said to be where the sun first rises each day over Oregon. 

Sloan came to Hat Point in his Land Rover LR3 last year. It's the high point on the Oregon rim of Hells Canyon, accessible only by a narrow gravel road that reaches 6,982 feet. It has some ruts, and rough sections, with big drop-offs and a 16% grade. 

"I'm pretty sure no other S54 has ever been up here," I said. We agreed that likely the only other person that would have driven up here in an M3 would have been Sloan, in his M3 convertible, which used to be his primary adventure car, until he parted with it last spring (with a send-off road trip, of course).


The M3baru did brilliantly, refusing to get stuck or fly off the road in one of the dozens of switchback corners. When we came back down to the cafe in nearby Imnaha, locals told us stories about how dangerous the road to Hat Point can be and how the invasive wolf population has decimated the wildlife ecosystem. It was a reminder that this was a sports car road trip like no other. 


Snake River Roadfcpeuro-e46-m3xi-part2-016

Choosing to make this journey in the summer was questionable, but we were both so ready to do this drive that we pulled the trigger on the first available window once the motor rebuild was finished. It happened to be during a record heatwave, which took its toll on us, but not the car, which never had a hiccup. The 40-mile gravel road that winds along the Snake River was hot and dusty, with no trees to shield us from the sun coming into the cabin. The road was beautiful, but RV and boat-trailer traffic kept our pace at a responsible level.


Steens Mountain


We made it to about 7,000 feet up the peak before a closed gate stopped us from reaching the highest segment of the road, which towers 9,700 feet, and is the highest road in Oregon. We turned around and immediately noticed a gas smell. Had a rock punctured the fuel tank? We inspected and determined that it wasn't leaking fluid, but that gas vapor was coming from somewhere, which we think may be an evaporator issue that occurs with the changing pressure at high altitudes. Sloan adds this to his to-do list of fixes that will need to be addressed. 


Alvord Desert 


On the final day of our 2019 road trip in this car, I remember asking Daniel if there was anywhere we could go where I could shoot the car "sliding in a dusty expanse at Golden Hour." It was too short notice to make that happen, so we put it off for a future trip. This is that trip, and the Alvord Desert is that place.

The Alvord Desert is a twelve-by-seven-mile dry lake bed that averages just seven inches of rain per year. Accessing it requires driving thirty minutes down a gravel road, then following a rutted, 500-foot long trail. It was so beautiful that when I got out of the car, I was completely overwhelmed by what I saw. This was the centerpiece event of this trip, and it blew away my expectations.


Where do you even begin when the scenery is so stunning in every direction? And what does it say about me that lonely nothingness is my ideal aesthetic? We drove across the playa and photographed some slides, but the clay surface was sticky and sludgy. Daniel said that it might be harder to slide on the clay surface than on pavement in some sections, and he was afraid of having a wheel dig in or grab unpredictably.

We mostly parked and marveled at the environment and the way the dust-covered, bug-spattered M3baru looked within it. By the time the sun had gone down, the temperature had dropped into the low 70s. I never wanted to leave. 


Sunset Beach


Calling it "Sunset Beach" on the perpetually gray Oregon coast must be someone's idea of a joke. Still, the cool, misty air was a welcome relief from the high temperatures we experienced all week in Eastern Oregon. 

The coastal sand may not be the toughest test for the M3baru, but it represented tackling another type of terrain and putting the car in a completely different landscape. The diversity of environments is what makes Oregon so special and makes the M3baru so perfectly suited to it. 


The Next Chapter

The last two years with this car have been a roller coaster—the M3baru has gone over budget and over time. But after completing sixteen hundred grueling, trouble-free miles, it finally feels like there's light at the end of the tunnel. The idea of an off-road sports car with a luxury car interior sounds ridiculous until you've tried it.   


This is a process. Restoring a classic car or building a race car is a challenge, but there's usually a template for that. There's no template for a car like this. It's unrealistic to expect everything to work perfectly, especially when this car's mission is so punishing. 

I was a believer in this project before, but deep down, I thought it was an expensive way to avoid owning a Subaru. A fun novelty that was ultimately too out of its depth to match the legendary WRX on its home soil. But the strengths of these ingredients—the chassis, the interior, the motor—are all undeniable. As a sorted, stress-tested package, it comes together as a sensational driver's car, both on and off the pavement, while still delivering comfort and livability for when the roads straighten out. Ultimately, the M3baru is a perfect answer to an extremely specific question. 


The M3baru will continue to be developed, and plans are already underway to fit 15" wheels with dirt tires and replace the short-throw shifter with a stock unit for smoother and more accurate shifts. 

Sloan isn't content with stopping there, and his mind is already thinking about the next build. "Hear me out–," he urges. "A cheap E46 M3 rallycross car equipped with SMG. I think the SMG would actually be good for this." 

author image
Written by :
Kevin McCauley

Based in Houston, Texas, Kevin has been professionally shooting cars for five years. When he’s not working on commercial projects or editorial shoots for Road & Track or Autoweek, he’s often finding creative inspiration from snapping pics of his 1980 911 SC, which is just as rewarding to photograph as it is to drive. --@capturingthemachine

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