BMW is rolling out new dealership standards and holding regional meetings to allay concerns about the program and what it will cost, said Steve Late, 64, chairman of the BMW National Dealer Forum.
The oldest stores will be revamped first under the Future Retail 2016 facilities program introduced last year, said Late, president of BMW of Austin, a Penske Automotive Group store in Austin, Texas.
Other concerns include an acute shortage of the i8 plug-in hybrid sports car and the long wait for the future all-new X7 full-size crossover, which is due in several years, Late said. Dealers don't anticipate they will get enough i8s to fill their extensive order banks -- at least not this year.
Late spoke with Staff Reporter Diana T. Kurylko.
Q. How was 2014 for BMW dealers?
A. It was just fantastic -- in some cases we almost had to pinch ourselves because it is so much fun. Nationally, BMW was up 10 percent. Locally, we were up more than that.
Do BMW dealers care whether BMW or Mercedes-Benz is the No. 1 luxury retailer in the U.S.?
Most of us dealers have an individual personality. I am competitive in everything I do. Personally it means a lot. No. 1 is never a bad thing. It is a wonderful place to be.
BMW continues to rate low in the NADA dealer attitude surveys. What are the issues, and why isn't the relationship with the factory improving?
I think you are speaking in the past tense. I am chairman now, and I can tell you under my watch it is the most positive relationship going between the manufacturer and the dealer forum that I have ever seen. My colleagues who have been on other forums say the same thing. Ludwig Willisch [CEO of BMW of North America] is an incredibly warm person, and he exemplifies that by the way he treats you.
And we made some strides. The other day they sent me an advanced copy of the latest J.D. Power and Associates survey, and we had some incredible increases.
Last year at NADA we had some disappointing news, and Ludwig was quite upset. A lot of it revolved around the sales area and the way we were treating and greeting customers and how much time we were spending in F&I -- those kinds of things. Once we got that information last January, we began our forum meetings. We rolled up our sleeves and said, "There are some things we can do better." And now, almost a year later, we have gotten results, things like the way we greet customers are up 30 percent points and the time we have our customers spend in F&I is greatly reduced.
What are the big dealer issues?
Dealer issues primarily have to do with Future Retail 2016 -- that is the biggest issue that BMW has today. They introduced Future Retail 2016 a year ago to the dealer body. In continental Europe they have already taken it.
We have 338 dealers in the United States, and you have some large, medium and small dealers. Any time the manufacturer brings out a program that involves bricks and mortar and processes and changes, everybody gets antsy with what will it cost and what will it entail. As any program like that is introduced it takes awhile for BMW to get it to the regions. They break it down into buckets -- which dealers need to get in on this right now, which dealerships may have been built seven or eight years ago and may not need as much of a refreshment. Some dealerships were just built, and they are brand spanking new.
BMW has to go into the regions and let people let know the vision.
What other major issues are you tackling?
In the last couple of months we were introduced to a new marketing program for 2015. We have some great new marketing ideas. They will come together throughout the country and give us a bit more marketing exposure. We have had a lot of new products, new powertrains and the i cars have come out.
Do you know how much BMW will spend? Will BMW do more TV advertising? What will BMW do that's new?
We are not sure yet. They are literally beginning to come into the marketplace. I am sure there will be television and a tremendous amount of e-commerce -- consumers are changing their habits daily. You have to have a marketing plan that encompasses all of the above.
Sales of the 7 series have dropped, and the car doesn't appear to be as competitive as in the past. What will BMW do for the redesign? Will it trump Mercedes and its S class?
It is not a fair game. They have a new product out, and our product is not out yet. It is one of the best-kept secrets what BMW is doing with this new product. Several of us had a peak in Munich this summer, and they showed us some ideas and some clay models. And we said, "This is wonderful." They are keeping it close to their chest. I can assure you BMW wants to be No. 1 in that segment and it will be quite competitive to say the least.
When will the redesigned 7 go on sale in the United States?
Toward the end of the year, in the fourth quarter.
The one thing that they showed us is the interior. We asked: "Please don't change it; that is so cool." I am sure they have done their homework with the success of the Mercedes-Benz.
Have dealers seen the new X1 off the new group platform?
The forum members got a glimpse. A couple of guys from our dealer body were jumping up and down. It just looks bigger and so solid.
How are you competing without a seven-seat crossover/SUV, and do BMW buyers really want one? The X7 isn't coming for two years at the earliest.
That has been my passionate topic for six years -- maybe it is a regional thing. I have been pounding the pavement and desks to get that vehicle. I assure you it will be a rousing success, and it will be huge. We need it for soccer moms or people hauling or if you have a lot of kids. The Cadillac Escalade is really successful in that market here in Texas.
How are the 2- and 4-series two-door cars doing?
Just this morning we delivered a couple of 4 series. They are new, and they are fresh. To me the front grille of the new 4 series when you stand and look at it front on, it is the prettiest grille we have on all of our products, and our customers tell us the same thing. We are not getting as many 2s yet. The 4s -- we cannot keep them.
How is the i3 selling?
The i3 was a little slower out of the chute in other pockets of the country, but once it got here and once people saw the technology and the cool interiors -- wham, bam, it is taking off.
How long is the waiting period for either i car?
They got a first batch, and that inventory dried up. They asked for extra cars. It isn't such a long wait. I didn't have inventory for three months because everything we sold was pre-ordered. Most of us are turning our inventory. Jacob [Harb, former head of i cars in the U.S.] told dealers they have outsold the original estimates and BMW is upping their allocations.
There is an acute shortage of the i8 plug-in hybrid. Are dealers clamoring for more, and will you get them?
I was allocated three for 2014, and I have a waiting list of 47 people. This year, maybe I will get eight or 10, and I still won't be able to fulfill them. It is the hottest design.
Which means you are charging over sticker price?
We do not do that. In my previous life I was a three-generation dealer, we had Chevy stores with Corvettes and hot pickups. My dad always told me those customers will have to come back in three to four years and if you sell them a product above sticker price, it could come back to haunt you. I know BMW frowns on it, too, but that doesn't mean that they can tell you what to do. I am hearing incredible stories of people buying these cars and taking them to auctions and getting crazy money for them.
BMW revamped its management team and brought in executives from Sweden and the Netherlands. How have they been received, and what ideas have they brought to dealers?
Chris Koenders [executive vice president of operations] is a really interesting guy. He has a vast amount of experience in Europe and the Netherlands. He is very people-oriented. He came to our dealership in June. He wanted to talk to my people and went straight to my Internet sales guys and asked, "How fast do you respond?" He is a real detail guy with personality. He has been going around the country having fireside chats. He has been very successful with that tactic.
Are dealers embracing the Genius program with specialists whose job it is to explain products and features?
Yes, we are embracing it. It was a great idea. What it helps us to do is greet customers quicker and have questions answered. We take them straight over to a product and show them colors with the iPad. Geniuses just talk about the products and the cars.
Across the country we are seeing our scores go up in the sales end of it, and we think product geniuses are a big part of it. I have two, and I am looking for a third.
Do dealers think the new facilities program is necessary? Are they resisting or worried about the rollout and cost?
It is not resistance. It is [about] disseminating what the program is and what it entails vs. what it might entail. They get out into the field, and they have a consistent message with your regional management people and an architectural firm to work with you -- or you can work with your personal architect. It never fails; once you have that meeting and that one-on-one and get your questions answered is when the dealers get calm.
What's missing in the product lineup? Do you want an 8 series above the 7-series sedan that's your current flagship?
I personally drive a 650i; it my most favorite car. We always talk about what is missing, and that is the seven-seat sport-utility.
Will the front-wheel-drive 1-series sedan that's due in two years be a big seller in the U.S.?
I think it will be fantastic, and absolutely it is a segment that we are missing. There are rumors there will also be a hatchback. Right now, the BMW brand is at the highest level of satisfaction from the consumer standpoint. The way BMW chose to introduce the i3 and i8 and the carbon-fiber technology has brought the BMW image to an all-time high.
Is service business up, and what is BMW doing to help?
Yes, it is up. The greatest thing BMW did was about 14 months ago. There was a huge parts problem worldwide and their systems blew up so to speak. It was such a disaster. It brought parts distribution to a standstill for a while. We had customer cars in the shop and couldn't order parts. Within 48 hours they came back with a plan and said, "We want to increase your loaner car fleets, and we want to keep your customers happy." It has been a tremendous thing.
The system was remedied in a quarter. The point is they reacted in an incredible manner with timeliness and effectiveness. If they have a recall campaign from time to time -- and all manufacturers deal with that -- boy, they are ready to make sure we are not out anything.
How many more loaner cars was each dealer allocated?
It was based on the size of the dealership and how much service business you have. We got an additional 35 units.