A common question we often get asked is why do the new style trailing arm bushings for the BMW E36 like the 325i, E46, E83, E85, and E86 have a slit in the casing. The answer is pretty simple.Originally designed and installed trailing arm bushings on these platforms have a solid case design. Essentially the sleeve and the bushing were one solid piece. The problem with this design in the application of the main mount for the trailing arm is the trailing arm doesn't just move on one axis. If the bushing deflected (twisted) vertically with suspension movements then it wouldn't matter to much. However, the rear trailing arm suspension in these applications moves vertically and horizontally. Essentially, the trailing arm bushing needs to allow the trailing arm to pivot around it's mounting point.
The problem with the original BMW parts is it limited the travel of the suspension slightly, the bushing would deflect too much, and then start to tear/crack. The new design with the slits in the bushing acts as a pressure relief and allows the bushing to pivot and deflect without additional binding. While the design may look odd from that of a traditional bushing, the intent is to prevent the bushing from binding. The split design also aids in installation slightly as well.