BMW of North America won't change the major components of its controversial dealership bonus program for 2018, but it will relax some of the metrics it uses so that more dealerships should qualify for the payments.
The updates to the Added Value Program were announced to dealers this month at a meeting in Las Vegas. While the modifications are a helpful step, the leader of the BMW National Dealer Forum says retailers are not done trying to revamp the program more thoroughly for future years.
"We just want to make sure we're all walking in the right direction and monitoring and encouraging the right behavior," said Patrick Womack, forum chairman and general manager of Laurel BMW of Westmont in suburban Chicago. "My goal [is to] immediately start on discussion of 2019 and beyond. We want to discuss and monitor things that are within a dealer's control."
Dealers had objected to changes in the program announced last year, particularly two new components that 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. Megadealer Norman Braman is suing BMW in federal court in Florida over the program.
Under the previously announced guidelines, the percentage of dealerships projected to fall out of eligibility in the two new categories — dealer sales loyalty and service effectiveness — had been well over 10 percent. With those components responsible for 70 percent of the possible AVP bonus of up to 5 percent of a vehicle's sticker price, missing the targets would be a major financial hit for dealerships.
"Over 90 percent of our dealership profitability is AVP," Womack said. "It's a huge impact to the dealers."
In addition to relaxing some metrics, BMW also agreed to additional steps if 10 percent of dealerships fall out of eligibility on the sales loyalty and service effectiveness components.
If that happens, BMW has agreed to meet with dealers about further adjustments aimed at making more stores eligible.
At the Las Vegas meeting, Shaun Bugbee, BMW of North America's executive vice president of operations, told dealers that the automaker wants to have 100 percent of the dealer body earning the AVP bonus going forward, Womack said.
The program will now take effect June 1. BMW of North America CEO Bernhard Kuhnt had previously put the program on hold until May 1, with all dealerships authorized to receive the bonus in the meantime regardless of their standing on the program's criteria.
Repairing rocky dealer relations has been a top priority for Kuhnt since being appointed U.S. chief just more than a year ago. He has said often that he wants to see BMW make gains on the dealer attitude surveys that the National Automobile Dealers Association conducts twice a year.
Kuhnt told the dealers meeting in Las Vegas that BMW had moved up five places in the most recent survey's rankings, from 22nd to 17th. Participation by BMW dealers almost doubled compared with a year earlier, and it was the best result for BMW since the summer of 2009, Kuhnt said.
"It is still not where we want to be, but it's a step in the right direction," Kuhnt told dealers, according to a BMW spokesman. "Let me assure you that we want to do more, and there's a long way to go. Your latest feedback motivates us to work even harder to improve."
BMW CEO Harald Krueger and other board members attended the Las Vegas meeting. With dealers participating from throughout North America, nearly 1,000 people were in attendance, Womack said. The overall message from BMW was encouraging, he said.
"We're nowhere near where we want to be," he said, "but we've made a lot of progress."