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

    by: David Kiley | AOL Autos

    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.

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    "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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    1 - 20 of 139 Comments
    vvijeshnair Dec 01, 2010 5:34 AM
    seems BMW gonna rock in 2011..
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    samblobhermit Oct 24, 2010 11:22 PM
    Front drive BMWs? I hope they're joking, or going to market them under the MINI brand. Or maybe the Triumph brand, which they still own (and apparently won't sell to John Bloor, who owns Triumph Motorcycles) If the front drive BMWs are the replacement for the 1-series, I do hope they call it something else. It would be hard for the BMW brand to be reduced to entry level, like VW, Toyota, or Chevrolet.
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    rjdigiorgio Oct 24, 2010 10:14 PM
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    n68firebird Oct 24, 2010 9:24 PM
    A coworker told me about his BMW, and said that he thought he had bought a high-quality car that would serve him well so long as he maintained it. Well, he maintained it, and it had less than 50,000 miles on it before it started giving him serious problems; he declared he would never buy a BMW again, and I won't buy one either.
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    hoot63 Oct 24, 2010 8:49 PM
    I will never, never, never, never, never, never buy, drive rent, lease, or even ride in as a passenger any BMW. The whole experience of owning a 325i was a nightmare I would like to forget. After spending all my disposable income on repairs I finally ditched the auto on Loop 12 in Dallas, Texas gladly paying the $500.00 impound fee to dispose of that colassal piece of S**T. As long a BMW keeps producing crappy autos for those repeat idiots that need to drive a status symbol (guilty, I now drive a pickup truck), the company will succeed somewhat. Never, Never, Never, Never, Never, Never again.
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    ascha79846 Oct 24, 2010 8:07 PM
    BMW has two big problems. 1) Since Bangle ruined the design they haven't produced a good looking car in years. 2) They are German and German reliability as measured by MB, BMW and VW Audi is the equivalent of Britain in the 60's. Bosch is the new Lucas.
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    interprogressinc Oct 24, 2010 7:47 PM
    Mazda doesn't feel neither drive like BMW even close. Mazda is P/S Japanese
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    dkk82d Oct 24, 2010 7:46 PM
    I've owned a 302i (while stationed in FRG) and a 325e. They were great cars- to stare out. Unfortunately, any time I drove them, it was only a short matter of time before the cars were back to the dealer, often for a glitchy electronic related issue that the dealer couldn't fix, but was happy to charge for. On the other hand, Audis and MBs are just as bad, and as equally expensive to fix. So I guess am stuck buying boring, albeit reliable, Japanese cars.
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    fbljr Oct 24, 2010 7:40 PM
    BMW has become too elitis tandexpen$$ive to have broad based appeal and sales success in today's US of A economy. The Mazda 3 drives, feels, and smells like a BMW at half the price.
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    tcconn39 Oct 24, 2010 7:37 PM
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    tcconn39 Oct 24, 2010 7:36 PM
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    uavmeister Oct 24, 2010 7:32 PM
    Yes, what of BMW's Motorrad (Motorcycle) line? Our "journalist" overlooked an entire market sector?! The way to play the game with (any) "luxury" car is to trade it in -before- it's goes out of warranty and If you can't pay to play, just stay out of the game. High-end cars (yes, even Cadillac) have suffered from reliability issues since the beginning of automotive time, because -they- are the ones with the latest and greatest gadgetry, that invariably hasn't had the benefit of being time tested. The leading edge is always riskier that way. So, someone paid $1,200 for a brake job after 49,000 miles? What, couldn't hear those discs grinding? Did you ever think of shopping around for a cheaper mechanic, or does your imagination end with the "stealership"? Puhleeaase, stop whining...sell your old BMW--go buy a Hyundai, or take the bus. It's the same mentality who mortgages their home to the hilt to obtain the money to buy expensive toys (like, a BMW) then bellyaches when they can't make the payments (the rest of us must bail you out). If you can't keep up, get outta the fast lane! Maybe you (maybe -lots- of us) don't belong there, after all. Once we have sold off our family jewels to the Chinese to pay for "a night on the town", it will be them, not we, who will be able to -afford- to drive BMW / Mercedes-Benz.
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    interprogressinc Oct 24, 2010 7:29 PM
    BMW is the the Best and forever!!!!
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    raccnsl Oct 24, 2010 7:24 PM
    BMW's are waaaaaaaaay overrated, waaaaaaaay overpriced, hughly troublesome pieces of automotive CRAP !
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    osasun42 Oct 24, 2010 6:51 PM
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    osasun42 Oct 24, 2010 6:48 PM
    Quality my Ass, type in 335 fire and see how many Beemers have burst into flames. BMW refuses to address the burning cars issue. Mine cuught fire a week after the factory rep looked it over because of the law suit we filed.
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    harrymankodi Oct 24, 2010 6:42 PM
    BMW already has severe QUALITY problems with many of its engines and fuel pumps.They are NOT responding well ataal.CEO builds the Culture but Germans do not believe in that...
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    iviethodaurum Oct 24, 2010 6:25 PM
    I like them ok I guess but Ive never been willing to pay their price.......they cost way too much for my taste.....I drive other german cars but having owned I cant remember how many german cars Ive never owned a bmw.........
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    steveh9801 Oct 24, 2010 6:24 PM
    I have a 325i and as long as the car is covered by warranty they are great cars. The problem is when the warranty runs out and you have what would be considered minor problems with other makes. Anytime you take the car in for maintenance it seems like you are going to drop a grand or two. I have not decided what I am going to do for my next car but I do know that the only way I will get another BMW is by lease and trading it back shortly after the warranty expires. Other then the high prices for maintenance I love the car though.
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    georgefleckii Oct 24, 2010 5:17 PM
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    1 - 20 of 139 Comments
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