[PeterKBMW]

It's a turbocharger, they can go bad. It's not a BMW issue, this is more than likely an isolated issue with your specific unit (quality control from the vendor).

There are no systems in place that will alert a vehicle that it has a blown turbocharger, The tell tale sign is a substantial loss in power/high pitch whine sounds/massive amounts of white smoke out of the exhaust. The massive amount of white smoke you saw was because the oil seal in the turbo failed, causing metal on metal damage.

Be happy you have a warranty and they will knock it out, My B5 Audi S4's passenger side turbo went out at 60,000 miles just out of warranty way back in the day…. that hurt my wallet since it was an engine out service!!!