Kuhnt, 52, spoke last month with Staff Reporter Urvaksh Karkaria about BMW's business outlook, product development cadence and the future of its subscription program. Here are edited excerpts.
Q: What have you learned from this period of uncertainty?
A: It's a completely new experience. I've never in my life spent 10 weeks at home in a row with family members. I've been using technology to a new limit. In that period, I learned that communication in a period like this is even more important.
Online sales, online activities have spiked dramatically and have kept a lot of dealers going through a time when they were nearly forced to be locked down.
How do you see the recovery shaping up in America?
The U.S. recovery is not going to be like in China, which had a clear V shape going into the crisis and going out of the crisis. In China, my colleagues were at home for two weeks, and after the third week they were already ramping up their business.
When China came out, all the other countries were thinking, "OK, will we also go through a V-shaped recovery?" I think that's not the case.
In America we are home for 10 weeks. In April, the industry was forecasting sales to be lower than it actually came out. Sales were down 50 percent to 60 percent rather than being 80 percent down. A lot of the volume players — with 84-month, 0-percent financing — tried to push the market in April.
How do you see the pandemic affecting sales for the rest of the year?
We will clearly take a hit for the months of April, May, June and possibly July. The ramp-up curve is indicating that in August we are going to be back to a more stable market — more in line with what we were planning for the year. That being said, I think this year will be heavily distorted by production constraints and logistical challenges in getting product to global markets. If a car is produced in Country A but Country A is closed, it's a problem.
What is BMW doing to stoke demand in the second half of the year?
The good news is that there is already a strong demand for our products. We have taken steps to clean and sanitize stores. We have to react to what customers want. If they want to make their transaction digitally and pick up a vehicle curbside, we should do more of this. At the current time, it is still hard to see how things will transition back to a more comfortable situation. If we think back to early March, we wouldn't have anticipated that we would be in the situation we are in now. I'm optimistic about returning to a new normal, with time, and we will be flexible with different options for the customer.
Daimler and Volvo had to shut down their U.S. factories shortly after restarting reportedly because of a shortage of Mexico-made parts. How do you ensure BMW's factory doesn't face the same issue?
Spartanburg, which restarted with one shift, has a clear plan. They know exactly how many parts they have and for how long they can operate. There is no intention to close the factory down again, but of course the daily output will be affected.
There are quite a few suppliers in Mexico. The plant restart was based on a clear hope that the Mexican government will open in the month of May.
I hope that the supplier base will be up and running ASAP because we need Spartanburg.
How do you see the pandemic accelerating the shift toward digital retail?
At our national dealer meeting in January, we discussed the topic of digital retailing and digital sales. The coronavirus crisis will accelerate that technology. Digitalization will be the new normal. But it does not replace the showroom experience either. I think there is room for both.
Dealer profitability was a major concern for the retail network going into the crisis. What's the plan to address those issues post-crisis?
Ever since 2017, our dealer profitability was climbing. Dealers should make a lot of money, so they invest in the right people and the right processes. During the crisis, our key focus was to help dealers with their liquidity on floorplanning, paying out sales bonuses and relaxing sales targets.
BMW dealer satisfaction is improving based on surveys. What would you attribute that to?
It is about communication and collaboration. We have established working groups to prioritize topics, and I believe we are all on the same page with what needs to be done. Not everything has been solved, but we will continue to work together.
A good example of our collaboration is the joint crisis task force that we formed with dealers at the start of the pandemic to recognize and quickly address key issues in the network together.
How has the pandemic affected BMW's product development and launch cadence?
BMW is always thinking long term and focusing on the future. When it comes to research and development, we are not saving one euro because that would be giving up our future. Everything we had planned to launch, we are still working on. None of the scheduled launches have been postponed.
We will get through this crisis as an industry; we will get though this.
How do you see the pandemic affecting BMW's investment in electrification?
The current situation will definitely not have any effect on our future investments. During this crisis we have said that we will not sacrifice our future with cuts now. Innovation is at our core. We will continue to invest in our future, and electrification is a big part of that. We are very excited about the coming iNEXT and i4 — both are fully electric, fantastic products.
Plans to bring the iX3 to the U.S. were scrapped. What was the reason?
Together with the dealer network, we have looked into the market requirements and decided on a different strategic approach and launch sequence for the U.S. We will always evaluate the right products for this market and are prioritizing the iNEXT and i4 at this time.
Prior to the pandemic, dealers expressed concern about rising inventory of the 8 Series flagship and the effect it is having on their expenses. What's the plan to help fix this?
Generally speaking, our inventory levels are well under control, but we are keeping a very close eye on specific situations. Our manufacturing plants in Europe were also impacted by the crisis and shut down, so there was no new inventory arriving. We have taken a careful and measured approach to restarting production and will stay flexible with our production levels so that we are building to match market demand.
Any plans to expand BMW's vehicle subscription program?
We have learned a lot about this business model in Nashville. No final decision has been made, but it is possible that we will offer a similar service in other cities in the future.
