BMW has been filling small gaps in its lineup and even increased its sales 2.4 percent in the United States during 2005 in a tough market.
The brand got over the rough launch of its new small X3 SUV in 2004 and is selling its redesigned 3 series with ease.
But dealers are concerned about a second change by the automaker in their margin structure, a topic that will be front and center at the BMW make meeting tomorrow.
Dealers felt that a decrease in the margin structure came at a bad time, just as BMW dealers are making significant investments to upgrade their dealerships. The decrease of 1 percent was made last summer.
Tim Smith, chairman of the BMW National Forum spoke with Staff Reporter Ralph Kisiel about dealer concerns and issues during the coming year. Smith is co-owner of Bob Smith BMW in Calabasas, Calif., in the west end of the San Fernando Valley. He also was chairman of the American International Automobile Dealers Association during 2003.
What new products are on the way?
We're expecting the Z4 coupe and the Z4 M model, and then the M model for the 6- series coupe and convertible. We're going to get the new 3-series coupe. Right now we have the old body style but we're getting the new body style. We're also expecting the new X5 at the end of the year.
Will the X5 get a third row of seats?
There's a market for the seven-passenger model. The question is whether it's a big enough market for the cost of producing that vehicle. There are people out there who would buy it. I don't know exactly right now what their plans are for that.
What have dealers learned about BMW people carriers?
Not a lot. (BMW CEO) Dr. (Helmut) Panke gave some general concept information in a video at our meeting last April. (BMW North America CEO) Tom Purves has talked about it a little bit, but I don't know much about what their plans are. It's got to be the ultimate driving machine, so how that fits in is very important to the dealers.
What about the 1 series?
We've been hearing about it for the last couple of years. We are told that the 1 series will come to the U.S. market, but we don't know what it's going to look like, and we haven't been given specific information on it yet.
Does BMW have any gaps in the current product lineup?
They filled in a few gaps for us when they brought out the 6 series. That's something we wanted a lot and they did a wonderful job of it. They brought it out as a coupe and as a convertible. Then the smaller SUV, the X3, filled another niche. I think they are filling in the gaps pretty well.
What are the dealer council's top three concerns?
Top of the list is retail profitability. We want to represent BMW in the best possible way. We feel we should be among the most profitable in the industry.
What supports that is supply and demand management. In other words, having the right models in the right numbers and trying to be more market driven than production driven. That's an issue we're constantly working on.
The third thing that's very important is that we're developing great people in our organizations. Profitability helps that because if we're profitable we can afford to pay for the right people in the organization and attract the best technicians, the best salespeople and the best support people.
How about with retail profitability and supply and demand?
Retail profitability is pretty darn good, but it's not the best in the industry. We would like it to get there. It should be good because of the investments that people have made. There's been tremendous investment in dealership facilities and real estate. That's becoming more expensive. The cost of concrete's doubled in the last year. Steel is up I think between 30 and 40 percent, and real estate in the areas where they want BMW dealerships to be has gone way up as well. So dealers deserve a good return on those investments. They are continuing to push us to upgrade our facilities. I built a new dealership. We moved in two years ago, and we're out of space.
Is BMW pushing dealers to upgrade?
They encourage it. It's a way that you increase the number of cars, your potential to sell cars. You get more cars.
What was your biggest disappointment this past year?
They made a change in the margin structure. It's the second time they've done it in the last few years, which was a big disappointment to me. It came at a time when dealers have invested big money in facilities, and that was troubling.
With dealers expressing dissatisfaction with the margins, do you expect changes in this area?
The dealer forum sure is going to try to enlighten them.