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Apparently BMW head units vary widely in their sensitivity to ground loops in aux mode. I installed an aux input for satellite radio that I hard wired into the fuse block on my first Z4 and never had a moment of trouble. When I did an identical installation in my ZM (using the SkyFi2 unit removed from the first Z) I have problems whenever the ambient temperature is above 78F. The aux input will play for a minute, then disappears. In cooler weather, everything works great.
My searching indicated that aux cut out problems are common, particularly in earlier Minis which have similar head units and are often caused by ground loops. That's why battery powered inputs work, but when the input is plugged into the car power, the aux fails.
The suggested solution is a ground loop isolator. I just installed a PAC SNI-1/3.5 3.5mm isolator bought off of Amazon and am waiting for warmer weather to see if this cures my problem. It was a 10 minute job to hide it behind the dash access panel.
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