Fence-mending with the factory is a hot topic among BMW dealers in 2011, said George Sharpe, chairman of the BMW National Dealer Forum.
Sharpe said BMW has cut dealer margins and payouts, which has sliced dealer profitability and resulted in dealers rating BMW poorly in the most recent NADA dealer attitude survey.
Still, Sharpe said, dealers are optimistic about 2011 because of a host of new vehicles coming this year, including the redesigned X3 crossover in showrooms now.
Sharpe, who owns Sharpe BMW in Grand Rapids, Mich., spoke with Staff Reporter Diana T. Kurylko.
Q: How was 2010 for BMW dealers?
A: We experienced a sales increase over 2009 and they are pleased.
What is the top issue that BMW has to address with its dealers this year?
We have to rebuild our relationship with BMW over the various take-aways over the past two years that affected the profitability of stores in 2009 and 2010.
How much real contact do you dealers have with factory management?
They are easy to reach, easy to contact, are accessible most of the time and will return calls upon request.
Are dealers satisfied with BMW?
I am sure you have seen the most recent dealer attitude survey where BMW is in last place. Their satisfaction with BMW is not pleasant right now.
What are the major issues?
The No. 1 issue is trust. Over the last three to four years there have been a lot of take-aways from the profitability of the BMW dealer and transferred to the profitability of BMW.
Can you give me an example?
There has been a reduction in new-car margins, parts margins, technicians' warranty labor rate, and the goodwill policy has been changed. And all that impacts the profitability of our centers.
Have your margins been changed again recently?
The parts margin has been the most recent. The MSRP has gone from 40 to 37.5 percent effective Sept. 1.
Is it competitive with what other luxury makes are paid in the United States?
I can't tell you.
We understand that BMW will be realigning dealer areas. What is prompting this?
They are realigning the primary market areas. They have not done it in 10 years and the demographics have changed and dealers have relocated their centers.
Is that a problem?
I don't think so as of today.
BMW dealers aren't as profitable as their competition at Mercedes-Benz and Audi. Is this a concern and how is it being addressed?
I can't tell you if they are not as profitable as Mercedes or Audi. Profit is a concern. The BMW dealers are well managed. As you can see, return on sales has been reduced over a period of time. They want to be competitive with Mercedes-Benz, Audi and Lexus and that is always on the forefront for our BMW dealers.
Are BMW dealers profitable? Do you expect to be profitable in 2011?
I expect to be profitable in 2011 and the BMW dealers expect to be more profitable in 2011. With the projected increase in sales that BMW N.A. is predicting, it should be a good year for all BMW dealers.
How is the new 5 series doing?
It is doing outstanding. The new look and the amenities, the value, the features and performance are outstanding. The styling has been very well accepted.
What do you expect from the new X3 crossover?
It is a much bigger vehicle with new features, more content and a lower price. And the car has been very well accepted so far. We are already delivering them. Sales are very good.
When does the X1 crossover come? We've heard it will be delayed until the third quarter.
I asked Ian Robertson [BMW AG board member for sales and marketing] and he said they will make a decision on that vehicle for the United States in the first quarter.
Are BMW dealers making money on new-car sales?
In today's environment it is difficult to be profitable in the new-car department because of the reduction in margin and the cost of doing business -- advertising, rent, sales and commission are charged to new cars.
What are BMW dealers doing to attract more service business?
BMW has free maintenance on all their cars, which is a very strong benefit for BMW clients. Our objective is to make sure they have a positive experience when they come in for maintenance -- the way they are treated in the service lane, the performance the technician provides, the free loaner cars that they receive upon request all makes for a positive experience when they bring their cars in for service. Hopefully that retains them in the BMW brand and by the measurements we have as far as loyalty to the brand, we are exceeding their expectations.
What are BMW dealers doing to attract more F&I business?
There is a tire and wheel program -- that is a very positive benefit for our clients. The certified pre-owned extended warranty program that we have available for our clients is one of the best in the industry.
Is it difficult to get BMW customers financed?
In the past 2.5 years since we have been in the recession BMW Financial Services has been an outstanding partner.
What does the factory need to do to help you sell more vehicles?
BMW is very proactive in their incentive programs. They meet the clients' needs. They do a great job reaching out to our clients by introducing the various incentives to them.
What's missing in the product lineup?
I think the one thing we need to expand more on is diesels. We have them in the X5, the 3 series and the 5 series. We need to expand them to more of the product line. The diesels we have are outstanding engines. They are quiet, powerful and efficient.
How about hybrids?
There is a niche for the hybrid client. We do not expect any large volumes. We have the X6 and the 7-series hybrids.
Are they selling well?
We have sold two of them so far, which is probably good for the size of our store.
What do you expect from the Megacity electric vehicle due in 2013?
For the large cities and the large markets, it will probably be a viable vehicle. It will be a good niche for them.
And the superluxury car?
There will be a few people that will buy them but I do not expect large numbers on that vehicle. It will be a halo car for us.
Is BMW's advertising attracting your target buyer? Is anyone being left out?
We are constantly looking at the demographics for BMW and Mini. BMW covers from the young to the mature person. We are reaching out to everyone in an effective way. Jack Pitney [the late vice president of marketing] did an outstanding job.
Should BMW do more Web-based marketing?
Web-based marketing is like magazines -- there are 20,000 magazines. Which one do you advertise in? BMW has been effective in their placements for Web-based marketing, and we are on the right track.