Can Kuhnt get BMW back on track?

BMW's new U.S. chief tasked with taking the brand to the next level

June 26, 2017 01:00 AM

Bernhard Kuhnt

Title: CEO, BMW of North America Age: 49 Home country: Germany Previous role: Headed 80-plus BMW Group importer country markets Other automakers: Worked for Jaguar Land Rover and Mercedes-Benz Time in the U.S.: More than 9 years as Mercedes-Benz USA sales executive and running Mercedes dealerships in California and Arizona Hobbies: Soccer fan; likes to race and has done the Mille Miglia endurance rally at least 3 times including in an open-top vintage Jaguar in heavy rain

"He's going to be busy."

BMW global sales boss Ian Robertson

With sales in decline and dealers clamoring for more balanced inventory, including more hot crossovers, BMW's new U.S. chief faces a big test: Can he get the brand growing again?

Dealers say they need fresher products, a better car-truck mix, competitive lease rates and a return to the days when BMW's "Ultimate Driving Machine" tag line resonated wholeheartedly with consumers. They're looking at Bernhard Kuhnt, CEO of BMW of North America as of March 1, for help.

Kuhnt (KOONT), 49, has a lot of work ahead.

Kalafer: Invited Kuhnt for a visit

"Bernhard has to take it to the next level and at a time when there's a lot of things happening — a lot of electromobility discussions going on, a lot of autonomous driving going on, a lot of tech being delivered or developed here," Ian Robertson, BMW AG board member in charge of global sales and marketing, said in April at the New York auto show. "He's going to be busy."

Some dealers and analysts say BMW and Kuhnt should look at how customer perception of the brand has changed. For example, in Kelley Blue Book studies and surveys, 29 percent of respondents say they will consider buying a BMW, higher than for any other luxury brand. But in new-vehicle shopping activity tracked by KBB, BMW trails Lexus, Mercedes-Benz and Audi, in that order.

"BMW has really lost their mojo," said Rebecca Lindland, senior analyst for KBB. "They have incredibly high consideration numbers."

But the brand isn't converting as many of those shoppers to buyers as it should, she said. "They're disappointing people," Lindland said. "People are looking and saying, 'There is supercompetitive product out there,' and choosing something else."

It has made for a tough couple of years for the brand and its dealers.

In 2016, as its U.S. volume tumbled 9.5 percent to 313,174 vehicles, the BMW brand lost the U.S. luxury sales crown it had held for four of the five prior years, falling to third behind Mercedes-Benz and Lexus. It was the biggest decline among luxury brands for the year — as BMW's incentives soared 26 percent, according to Autodata.

Even the brand's most recent sales title, in 2015, was marred by reports of BMW "punching" vehicles, a practice in which automakers ask dealers to self-register vehicles as loaners. Even though BMW finished No. 1 in reported sales among luxury brands in 2015, it came in No. 3 in U.S. vehicle registrations that year, behind Lexus and Mercedes.

One U.S. dealer wants Kuhnt to reconcile the reality of what he calls "punchgate" and BMW's production-driven culture against the market's natural demand for BMWs and the state of the dealer network. That will better position him to strengthen the brand, said Steve Kalafer, owner of Flemington BMW in Flemington, N.J.

"It went from the car company of the ultimate driving machine to the company of the ultimate check-the-boxes-and-let-us-report-what-makes-Munich-happy," said Kalafer, a BMW dealer for 40 years. "They've all been subordinated to the need to report a number, no matter how unreal that number is, and the customers have found out. Now they come in and say: 'Is this a punched loaner car?'"

Kalafer, whose dealership group's eight rooftops sell 16 brands, said he loves the BMW brand. Though some products have aged, the new and redesigned vehicles will be exceptional, he said, "however, it will be exceptional product in a world of exceptional products."

He hasn't met Kuhnt but invited him to visit Flemington BMW, a 70-mile drive from BMW's U.S. headquarters in Woodcliff Lake, N.J. Dealers often don't tell automaker executives the truth for fear of retaliation, but many BMW dealers "are very unhappy right now," Kalafer said.

BMW has declined Automotive News' requests to interview Kuhnt. He likely will do his first interviews in his new role in November at the Los Angeles Auto Show, a spokesman said.

Slipping sales
BMW brand's U.S. sales have fallen 15 of the last 18 months after hitting a U.S. record in 2015 and leading the luxury sales ranking for 4 of 5 years.
	Sales	% change	Rank
2011	247,907	13	1
2012	281,460	14	1
2013	309,280	9.9	2
2014	339,738	9.8	1
2015	346,023	1.9	1
2016	313,174	-9.5	3
2017*	120,124	-3.6	2
* 5 months Source: Automotive News Data Center

Robertson recruited Kuhnt from Jaguar Land Rover in early 2015 with the plan for Kuhnt to build a network at BMW's Munich headquarters and then take over one of the big markets. BMW wanted to send a top person to the U.S., and Kuhnt quickly earned high respect in Munich. With February's announcement, he went from overseeing more than 80 countries as the head of BMW's importer markets to leading just one — the company's second-biggest market worldwide after China.

Kuhnt, a native of Germany, already knows the U.S. From 1983 to 2003, he worked for Mercedes-Benz including a stint as vice president of sales for Mercedes-Benz USA overseeing divisions in Chicago, San Francisco and Los Angeles. From 2003 to 2009, he headed Mercedes-Benz dealerships in Anaheim, Calif., and Chandler, Ariz. He joined Jaguar Land Rover in 2009.

Are higher sales part of his mission? Eventually, Robertson said. But with U.S. industry sales likely flat in 2017, it won't be right away.

BMW is replacing some models in its lineup. The redesigned 5-series sedan went on sale in February, and the redesigned X3 crossover will go on sale this year.

Beyond this year, "of course we want to see the U.S. market grow," he said. "As we bring a different profile on some of the models — X7 being an important element that we don't have at the moment — that will grow the market."

The X7 large crossover is expected to go on sale in early 2019.

Willisch: Improved ties with dealers

Politicking

Incentives have moderated in 2017, but BMW brand's U.S. sales are down 3.6 percent through the first five months. That said, BMW has worked to rein in its inventory problems. Punching has subsided though not gone away, several dealers said.

U.S. stock levels have gotten "a little too low," said Ludwig Willisch, head of BMW Group Region Americas and Kuhnt's predecessor as U.S. chief. His pending retirement drove the leadership change.

BMW's redesigned 5-series sedan that went on sale in February is among additions to the brand's lineup that executives expect to fuel increased sales.

Willisch turns 61 in early July — he likened that to being a "fossil dinosaur" in BMW's world where senior executives typically retire around age 60. Willisch's departure date hasn't yet been announced.

Dealers who have spent time with Kuhnt since he took his U.S. role give him high marks: "open-minded," "down-to-earth," "knows how to politic and get things done" are typical descriptors. They especially like that he has been in their shoes on the retail side.

"He's run a dealership — that is very valuable from our perspective," said Mark Smith, co-owner of Principle Auto, which owns two BMW stores in Texas.

More crossovers

Smith, a member of the dealers' aftersales council, wants a better inventory balance. BMW is increasing its mix of crossovers, which represented 42.1 percent of sales in 2016.

That rose to 46.8 percent during the first five months. Dealers can't get enough X1 compact crossovers and are eagerly awaiting the redesigned X3 and the new X2 crossover coming early next year.

"It's mix and content," Smith said. "It's a difficult brand because the consumer can order it in so many different ways. That adds complexity you don't see in a Toyota or Lexus or a Cadillac for that matter. And they got very conservative last year, and they cut back on a lot of inventory. They probably cut it too short, and there's a shortage now. Trucks continue to grow, and they have to figure out that balance."

Analyst Dave Sullivan of AutoPacific agrees that the proliferating model lineup is a challenge for BMW dealers: "There are so many body styles, between GTs, coupes, sedans, crossovers, M versions — it's overwhelming for a consumer and can place a burden on dealers having to finance these vehicles sitting on their lots."

The brand's mix in the U.S. has been biased toward cars as the market here has moved rapidly to SUVs and crossovers, he said, but the X1, redesigned X3 and the upcoming X7 will help.

Improving dealer relations and historical bad blood is another challenge.

"Ludwig started us on a path to build great relationships with the dealers, and that hadn't always been part of their program," Smith said. "Bernhard has to take the baton and take the next step of the relay."

Burkhard Riering contributed to this report.