That is the small plastic piece of the bell housing. Tranny has to come out and you have to replace the seal at the input shaft. At the same tome replace the one at the rea of the tranny.
This helps
http://bmwe32.masscom.net/johan/gear...rbox_seal.html
and maybe you use a speedy sleeve
http://www.bimmerboard.com/forums/posts/458355/
Pls add to your profile or signature
1989 BMW 525i or 525iA in case of automatic tranny
helps us to help you
even better if you add the production month and year, especially required for wiring plan questions. VIN decoder is on my website below.