• Oct 1, 2010
BMW has set lofty sales goals for the near future. Will... BMW has set lofty sales goals for the near future. Will chasing those numbers come at the expense of its vehicles' quality? (BMW)

BMW is a brand that for decades has embodied the notion of sporty performance driving. Indeed, the company invented the "sports sedan" in the 1960s, and in the 1980s saw its products become de-rigeuer symbols of business success.

Today the company is focused on another kind of performance: Sales. With grandiose goals of increasing worldwide sales by 55 percent in the next 10 years -- an objective that has little to do with quality or design excellence -- skeptics wonder whether the German company is beginning to lose its way.

At The Paris Auto Show this week, BMW had a slate of mostly fresh versions of vehicles we already know: A new 6 Series coupe, a new X3 crossover, and a new 5 Series Touring. But there was also a new concept car for a hybrid vehicle, as well as an electric plug-in, Mini-branded scooter. On the horizon to help meet the sales target are small, front-drive BMW cars -- a real departure from the traditional rear-drive cars the brand has always championed -- and even smaller electric city cars.

"Any company that chooses a sales number as its primary and most publicly stated objective is wiring its organization for something that doesn't necessarily have to do with its reputation, quality, or engineering, which are the things that, in BMW's case, are the things that have made it successful," says Charlie Vogelheim, executive editor of auto buying website IntelliChoice.

BMW CEO Norbert Reithofer said earlier this month that the Bavarian company aims to sell 2 million vehicles a year worldwide by 2020, up from 1.29 million last year. Most of this growth will come from the BMW brand. The company also owns Mini and Rolls Royce, both acquired in the mid-1990s when BMW was also focused on increasing sales and scale. At that time, the company was wary of predictions about massive consolidation in the auto industry and wanted to grow through acquisition to make sure it was a buyer and not a seller.

Indeed, The company has always been fiercely independent. The Quandt family of Germany holds a controlling stake in the company, which has long positioned itself to avoid being a takeover target by another auto company.

The acquisition of Mini came as part of the larger of acquisition of the Rover Group, which proved disastrous for BMW. In search of sales at the lower end of the consumer spectrum and an engineering base focused on front-drive vehicles, BMW lost billions on Rover, a company that was in tatters and proved impossible to integrate into BMW's culture. BMW eventually sold off Rover and Land Rover, but kept Mini.

After that experience, it's no wonder that BMW is now set to achieve its growth dreams from within, rather than by acquisition.

"We can achieve our targets with the brands we have, and through alliances we have formed," said Reithofer earlier this year on the sidelines of the Geneva auto show. Indeed, according to sources at the company, BMW looked into buying Swedish automaker Volvo from Ford, but passed on the opportunity because of a fear of a repeat of the Rover fiasco.

BMW's growth will come in several areas. The company has big plans for China where it currently sells about 120,000 vehicles each year, and is adding capacity to build 300,000. It will also be expanding the BMW lineup with front-drive cars smaller than the current 3-Series, which will begin rolling out in late 2012. Those cars are being added to help BMW expand its entry-level premium offerings, as well as to meet stiffening fuel economy regulations in North America and other markets. BMW is expecting a resurgence in North American auto sales in the next five to seven years, and also expects that its smaller, less expensive front-drive models will take a bigger market share.

Mini, which sold 217,000 vehicles worldwide in 2009, is a big part of the plans. BMW management envisions Mini's potential to be more than 400,000 vehicles annually, to be reached by expanding the model offerings. The company is launching its first four-door Mini, a crossover called the Countryman this year. It will join the Mini Cooper and Clubman, and even more variants are being planned.

BMW also believes it will capture a healthy share of the green vehicle market as it introduces more hybrid and electric vehicles. There will be a full hybrid version of the 5 Series out in 2011, and more are planned to roll out over the next five years. That plan includes BMW's "Megacity" electric vehicles that will begin rolling in 2013 under a new brand designation.

Given BMW's recent success, it's not easy to poke holes in its growth plans. It passed Mercedes-Benz in sales in 2005 and Fortune Magazine named BMW "The most admired automotive company in the world" earlier this year. Certainly the job it did in resurrecting the moribund Mini brand will find its rightful place in top business school curricula.

But there are cracks in the foundation. Some of BMW's recent designs have not been well received by the auto press, or paying customers. BMW has also struggled in recent years to develop designs that fit with the brand's image and consumer perception, especially outside of its comfort zone of sports sedans and a roadster like the Z4. The X6 luxury crossover has neither been praised critically, nor lit showrooms afire. True, it was launched around the time of the financial crisis, but it has lacked buzz ever since. The same can be said in North America of the 5-Series GT, a crossover derived from the 7 Series sedan chassis.

In the past year, BMW North America has also shifted its marketing strategy to one themed "Joy of Driving." Indeed, BMW's U.S. ad agency, Austin, Texas-based GSD&M, has become the company's lead global ad agency, which means it has taken a leadership position in defining the company's global brand strategy. The company has not shelved its long-running "Ultimate Driving Machine" slogan, but it has de-emphasized it in favor of "Joy."

For years, BMW's ad slogans around the world have loosely translated culture to culture as "Joy of Driving." As far back as the late 1990s, BMW was trying to get the U.S. to adopt the "Joy" positioning to harmonize a global brand idea. Those efforts were rebuffed until recently when BMW's Munich Germany leadership insisted.

"Ultimate Driving Machine," say BMW's U.S. officials, while distinct in the marketplace and considered one of the most effective (and longest running) ad slogans in the U.S., was holding the brand back. BMW's research shows that too many premium car buyers either did not find BMW's performance-driven brand image accessible, or they rejected the brand as being for people who are "arrogant" or "poseurs." The "Joy" brand idea is designed to open up the brand and make it feel more accessible without, hopefully, sacrificing its aspirational quality.

But some analysts and critics believe that BMW is on the road to doing just that. "BMW seems to be on a mission to dilute their brand's equity," says Cameron McNaughton, principal of auto marketing consultancy TreeFarm Partners. "They have been chasing volume for years, then you have the 'Joy' campaign which demoted the long standing 'The Ultimate Driving Machine' to an afterthought, and now you have the announcement that they are taking the brand into small front-drive cars... It's all going to work to water down its brand identity."?

Worse, and possibly more dangerous for the company, is that the BMW organization is being rewired to emphasize sales, potentially at the cost of profits and reputation. As Volkswagen, for example, has chased big sales numbers, it led the company to make several poor decisions -- developing the VW Phaeton luxury car, which was an expensive flop, and acquiring money-losing Spanish automaker Seat to name two.

"There is risk in any strategy," says Tom Kowaleski, vice president of corporate communications for BMW North America. "But the risk comes in how you execute."

Kowaleski notes that growth will come from continuing to acquire new customers in its two main markets of Europe and North America, plus in regions with newly affluent customers like China. As far as BMW becoming to ubiquitous and losing cachet, Kowaleski says, "If you look at the numbers, it's hardly as if there is one on every street corner."?

A critical piece of BMW's culture has always been profitability. By focusing on premium cars, and wielding a financial cudgel over the entire organization to keep costs down without sacrificing engineering excellence, BMW has always been well positioned to take the occasional risk. Steady profitability has always been part of what has made the company, not just the car, so admired. And though it seems just a few years ago that Reithofer's predecessor, Dr. Helmut Panke, resisted setting long-range sales targets in favor of goals of bigger profits and better quality, it looks like priorities in Munich have shifted.

Today, it's difficult to miss the parallel proclamations of BMW and rival Audi, each targeting the goal of being the world's biggest premium brand, and beating one another to the top -- wherever the top is. Isn't making the most money the "new black" of global business, rather than achieving the greatest sales? It's enough one-upmanship on sales targets to make one place their bets on Mercedes-Benz.?



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  • 139 Comments
      • 9 Days Ago
      i drive a 1992 toyota tercel, i get from point A to point B, period. i don't use it to impress girls. my guitars handle that part of the story. so what was the question again?
      msgoe
      • 9 Days Ago
      we have a 525 I for about 5 years now, it drives amazing however you do have to spend 3 to 4 thousand per year to keep it running .. which leads me to the problem that BMW will soon have .. we are getting ready to replace the car and as much as I love driving it .. it is really not worth the repairs, we have an american made car with twice as many miles on it and we spend less than half per year keeping it running as we do the BMW >>> so their real problem is going to convince previous owners to purchase again ... I for one will not .. when you think about ********** the perfect scam .. the repair costs are more than it would cost to buy a new one ..
      • 9 Days Ago
      I own a 2000 BMW 323i, It is a beautiful car and I love the way it drives, only I have had the transmission replaced,( only reason the warranty paid for it was because I had taken it in so many times during the warranty period for a horrible noise, that no at the dealership could figure out what it was, so they finally sent some one from headquarters came down and found it to be the transmission, and replaced it.) It has had so many other things from the key not unlocking the doors, to several window motors being replaced for not rolling up or down, to brakes having to be replaced more than the regular car, to leaving me on the side of the road because it overheated and had to be towed in. There have been so many things that have gone wring in this car that the file at the dealership is around 6 inches thick, when we questioned the excessive money that we have had to spend on this car, the response we got was that they should of told us that when we bought a BMW we should expect to spend around 3 to 4 thousand a year on it. Had we known this,we would never had purchased a BMW. I previously owned a Honda and had it for ten years and in that whole time never had a minutes trouble with it, and never spent money on it except for oil change and tires. I will never own another BMW, it is not worth the headaches or the money.
      • 9 Days Ago
      Mr Volgoheim DONT DO IT!!! Dont give up your quality for money! It is a street called deterioration and it is one way! So much easier to protect a reputation than to salvage a bad one! And do alot of research into the companies that focus on profits without quality..... I bet their pocket book is empty !!
      oldchvytrx
      • 9 Days Ago
      What I've gathered from most of those posting here is that the idea that BMW owners are for the most part "arrogant posiuers" like the artlicle implied at one point.......more over I'd add from what I've read most who buy German nameplates are the same arrogant petty people. I'd say less than 1 in 10 who buy "Premium Sports Cars and Sports Sedans actually know how to drive them, and appreciate them for what they are. How many of you "putz's know what a 2002t is? Ever seen or driven a 2002tii? You fools probably think what ever it is was built in the year 2002...... LMAO! This car was a "Sports Sedan before there was such a thing! Care to try and guess who made it? Even Porche has ********* mystique! For the most part the average Porche owner these days hasn't a clue what a 917 or 937 are. Or the 356's either! Even the bragart who claims to "rail the desert at 135 in a overhyped Toyota (Lexus)" han't a clue ********* like to put a "real sports car" through its paces at a race pace. and YES, I DO...... 40 years of racing many things on and off road, 2 and 4 wheels........ I love fast machinery and brand names are just a way of identifying them, not "pigeonholing" them. Most of you buy them because they cost a lot and make the girls think you've got a big wallet and sex organ.......... To the guy with the 335 problem car..... LOL the 325's and 335's are/were BMW's for people ********** can't afford a "Real BMW".....you get what you pay for!
      arvig
      • 9 Days Ago
      stjohninfo posted this tidbit: "i drive a 1992 toyota tercel, i get from point A to point B, period. i don't use it to impress girls. my guitars handle that part of the story. so what was the question again?" My reply: Well, some people drive a certain sports or luxury car because they happen to like the car, not just to impress girls. Just like some people play the guitar because they are musicians and like making music, not just to impress girls. :P So, what was YOUR question again? :P
      • 9 Days Ago
      I own a 2007 BMW 530 (with sports package) & 2001 MB S500. Very different cars. Very different feel. Both are great car. High performance. I used to drive Camero (77), Tercel (90), Volvo v70 (95). Both BMW & MB are much bette build then these ones and more expensive, too. Guess, you get what you paid for. ;)
      • 9 Days Ago
      BMW IS THE BEST CARS EVER MADE . AND WE HOPE THEY WILL BROAD BAND BMW ALL OVER THE WORLD AND LESS EXPENSIVE SO THAT THEY CAN INCREASE THEIR PERFOMANCE .
      • 9 Days Ago
      I know our family will not ever buy BMW again! Service in Northern Ca. was terrible!
      • 9 Days Ago
      I am an Air Force and seek ing someone .I need a woman who can love me back ...I also uploaded my hot photos on kissmilita ry.c omunder the name of jay55..It's the largest and best club for seek ing Army, Navy, Marines, Air Force, Police Force, and the admirers of those who wear the uniform.I just hope you don't mind me being a soldier ...Please Check it out!I'm serious
      • 9 Days Ago
      The only German car brand that's impressive is Audi. The others are seriously just status symbols.
      b. clark
      • 9 Days Ago
      The Step Tronic tranny on my 04 - 545 sedan recently went blooey at 47000 miles, the first tranny in my experience of driving that has caused trouble and I am 87. BMW charged me over $8000 for a swap and they paid not a nickel. Late in 2009 the carbon fiber tranny pan started to lead and that was $1000 for replacement . My maintenance supervisor told me that this was not unusual with the carbon fiber pan. No more Beamers for me and I am spreading the word.
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