This DIY is for the euro e36, I think the north american model had different shaped speaker housings - not sure. Mine is a CB82-EUR-03-1997-E36-BMW-323i

I recently realized that my rear speakers were completely dead, all the rubber around the cone was broken up and sounded terrible, 22 years of use though, I'm not complaining. I looked on the net and the general solution was to use one of the 8X9 adapters and put an 8x9 speaker in there, however I didn't really want the boomy 8x9 sound and random wires all hanging out the bottom of my boot, so I thought I would see if I could replace the original speaker in the oem housing and keep everything stock looking and hidden.

First things first take off the grills on the rear parcel tray, just pull up on the back of them. Take out the two screws and pry the little metal clip past the sheet metal, unplug the stock wiring harness.
Now for the speaker replacement - I bought these speakers, they were the right size and pretty cheap which were my two selection factors.
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Pry around the bottom vented part of the housing with a screw driver, there's glue all round so once you break that all round you can just pry the whole thing out of there.

Now you're looking at the back of the speaker, put your screwdriver between the plastic rim of the speaker and housing and twist in a few bits, it should come off like below.
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Now for the fun bit. Tape up the speakers to stop any metal dust from getting in there and cut around the rim, don't go crazy here you only want to remove the outer rim, no more and no where near where the speaker rubber starts. I did this in about 5 minutes with an angle grinder and a cutting disk, just make sure not to get it too hot, don't want the glue on the rubber come off, I cleaned off the edges with a bench grinder but that's not really necessary and to prevent any metal bits from sticking to the magnet I gave the speakers a quick blowjob whilst still taped up so none of it could get into the speaker.
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Next I just put a bead of construction adhesive around the interior rim of the housing, place the speaker in there, put some more construction adhesive around the rim of the speaker, connect up the speaker wires internally, there's a small and big spade connector so it's impossible to do it wrong and you're done. Leave it to set up for a day and chuck it in the car. Sounds fine and looks stock, the finished product is below without grills of course so you can see. I wasn't really sure this would work until a couple of hours ago so I was pretty lazy with photos.
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