LOS ANGELES — BMW of North America has promised to put controversial changes to a dealership bonus program on hold until May 1 while it works out a solution with a select group of the brand's retailers.
Bernhard Kuhnt, who took over BMW's U.S. operation March 1, announced the reprieve to dealers in mid-November. Kuhnt, a former dealership operator himself, says the change of plans is emblematic of his goal to work collaboratively with dealers and repair the brand's fraught relationship with its sales network.
"There were still some questions, so what we did say is that we're going to honor and grant everyone into the program until next year," Kuhnt told Automotive News at the auto show here last week. "But at the same time, we demanded, in a positive way, that we're going to work together, a self-selected group of the dealers together with us, to work out a solution that we're planning to announce in April. So [it's] very collaborative: Take away the headache, work on it together and announce it together."
At issue is BMW's Added Value Program, which rewards dealers with a bonus worth up to 5 percent of a vehicle's sticker price for meeting certain sales and service criteria.
BMW had announced changes to the program this year. Two new components would measure and tie parts of the bonus to the proportion of BMWs a store services in its market as well as the number of customer defections to other brands.
The changes were concerning to the dealer body as a whole, said Tim Kraemer, chairman of the BMW National Dealer Forum.
In September, mega-dealer Norman Braman filed a federal lawsuit against BMW of North America, arguing that changes to the program represented unfair and illegal modifications to the franchise agreements for his two Florida BMW stores.
Kuhnt said BMW previously had agreed to delay the changes from taking effect this summer.
The delay to May 1 is more meaningful, not only for the amount of time and the let's-work-it-out directive from Kuhnt — he also told dealers that until the changes are settled, BMW would qualify all dealerships to receive the bonus regardless of where they stand on the existing criteria.
Kraemer, COO of Priority 1 Automotive Group, with three BMW stores in Maryland, described the turn of events as "probably the most positive interaction" he's had with brand leadership.
"It's a huge win for the optics for BMW," Kraemer said.
Kuhnt declined to say how many of BMW's 344 dealerships had failed to qualify for the bonuses under the program's existing criteria.
Nevertheless, it's clear that granting the bonus to those stores for the next five months will cost the automaker some money.
"It's costing us, yeah," Kuhnt said. "But we want to work together with our network, so let's take away their headache for the time being and work together, and then we're going to solve it together. That was my motivation."