Infiniti's U.S. boss gets new products, positioning

Michael Bartsch left as COO of Porsche Cars North America to become vice president for Infiniti Americas less than a year ago. But he is already in the thick of the brand transformation begun a year earlier by his global boss, Johan de Nysschen.

The task entails a new world view for the once North America-only luxury brand. It comes with a new product lineup, new brand positioning, and the full embrace of U.S. dealers to communicate it all to U.S. consumers.

Bartsch, 55, a native of Australia with dual Australian-German citizenship, is the fourth generation of his family in the auto industry. He spoke at his Nashville office with Staff Reporter Lindsay Chappell and News Editor Dave Guilford.

Q: Was the fiscal year that ended on March 31 good for Infiniti in the United States?

A: We finished with sales of about 120,000. Was it our best year? No. Is it on expectation? Yes. And profits were good, although we don't have a final reconciliation.

We have to look back over the year and say that we're comfortable, but there's still an awful lot to be done. So I don't want to take any comfort in the numbers.

Where do Infiniti's repositioning plans stand?

We're right at the beginning. From a USA point of view, and even from an Infiniti Motor Co. point of view, there are going to be three distinct phases, with 2014 and 2015 being basically the preparing-to-grow stage.

That's a little different than the globalization effort. If you look at Infiniti from a global position, it's very much in its infancy. We've just started up in China and sold 17,000 units this past year. And Europe is in even more of a startup position -- they did 11,000 units this year.

By comparison, the U.S. market is quite mature. We've been here since 1989 and are, in fact, celebrating our 25th anniversary.

So for me, these next two years will be more of a preparation for that next major growth phase, which will come in 2016-2017. That's when we will really consolidate the business and get the critical mass we're looking for.

And then the third phase will be around 2018-2020, when we start bringing in some very high-level reward cars. I would see that third period as being a bit of a confirmation for us. At that time, we will no longer be chasing the vision, but there and defending it.

There's an often touted figure about the importance of premium cars, and I think it was Johan who was the first to really say it -- that 50 percent of your profits in this business comes from about 10 percent of the volume. So in that case, we have to look forward to that 2018-2020 phase.

But as we achieve everything we intend to achieve, we will also spend part of our time defending our territory. The market doesn't stand still. You don't have to be a genius to realize that there are a couple of other brands that probably have a vision that's not too different to ours.

What brands, for example?

A good example is Jaguar. And we have to watch Acura and we have to watch Cadillac. Everyone realizes that you need a good presence in this premium segment from an overall group point of view.

A frustrating thing for me is that, while we have good numbers and good profit, we still have the challenge of actually lifting ourselves so that people start genuinely considering us as a Tier 1 luxury brand.

This is something I've had to spend a fair bit of time looking at. We score very high on metrics like the Customer Service Index and the Sales Satisfaction Index. But if I walk into a dealership, or I look at our standards, it's really not reflective of what I would consider Tier 1 premium.

Are you working with retailers to make sure they have the right luxury-brand touch points?

Yes. Premium doesn't stop at the product these days. And every touch point has to deliver basically the promise that's in the brand. It has to be a broader expression of lifestyle. If we are young-minded and we do everything great with the product, we do everything right with our communication and we get them into the dealership, but then somebody offers them a foam cup of coffee with a swizzle stick, what happens to the brand promise? It totally collapses.

Automakers' facility standards have been sore points for dealers everywhere. How do you motivate retailers to invest?

You give them a good return on their investment. It's as simple as that. Where you have poor return on investment, you have dealers pushing back -- quite legitimately. They're pragmatic businessmen. But in a business model that delivers the right return on effort, dealers will make the right investment decisions.

The problem is not the dealers. A far more accurate assessment is that Infiniti understood exactly what we wanted to do and who we wanted to be back in 1989, but we basically got left behind. We sat still.

AUTOMOTIVE NEWS: What is the motivation for a dealer to create a more luxurious shopping environment?
MICHAEL BARTSCH: All the research that I've seen, everything I have experienced to date, tells me that dealerships that are brand-aligned make better profits than dealers who are not brand-aligned. Particularly in the premium segment, buyers will gravitate toward where the experience is the best.

How do you communicate this sort of reinvigoration to your retailers?

This whole process of rebuilding is a chicken-and-the-egg thing. If we just say, "Here it is and we expect you to be there," you won't get any traction. So we've had grass-roots meetings with our dealers to give them a clear, accurate midterm vision. And I don't mean corporate fluff and bubbles, because they're far too astute and have been around too many people like me for that.

We have to sit down and say, "Here are the product plans, here is the product cadence, here are our volume expectations and here are why these volume expectations are realistic. And here is the business model to do it."

Stage two is you'd better damn well deliver, because they're watching. You always have early adopters, and they're extremely important. It's far better to have change that is peer-group-led because there's nothing that drives success more than successful people.

You get early adopters out of 10 to 20 percent of your dealers. It doesn't take long for the peers to start seeing and understanding the success. There will always be the 10 percent who -- no matter what -- will be dinosaurs. They were born skeptics and they will die skeptics, and that's fine.

You mean "That's fine, and they'll still be part of the tribe"?

No, they'll probably drop out. Because the force of competitiveness in this industry basically says adopt or die.

Is there a risk that as Infiniti invests in new products important to non-U.S. markets it leaves you short of resources for North America?

No, not at all. What Johan really astutely recognized is that our brand has to become international. The days are gone when you could be competitive by just producing five cars for this market and five models for that market.

To be a premium brand now, you have to be a brand that is international. You have to have a model lineup and a model cadence that works internationally. Otherwise you simply cannot get the critical mass you need to be competitive.

Infiniti next year will get the compact Q30, which is built on a Mercedes-Benz platform, designed by Infiniti in London and built in England. Is there as much enthusiasm for the Q30 in the United States as in Europe?

Yes, there's excitement here because we want to expand the product range. That's one of the fastest growing segments of the luxury automotive sector.

It will be a far more important vehicle for penetrating the European market. But it's still going to be a very critical contributor to the overall volume growth that we're looking for here.

You can reach Lindsay Chappell at lchappell@crain.com

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