New York Auto Show: BMW Used Cars, Service Support Profits

(MoneyWatch)  BMW sales in the United States are down worse so far in 2009 than they were in 2008. Jack Pitney, marketing vice president for BMW of North America, said that within reason, BMW is OK with the fact that sales are down, as long as profits are maintained. BMW doesn't break out profits for individual markets.

Naturally, BMW would rather sales kept growing forever. But to protect profitability, BMW's U.S. subsidiary has cut back on lease discounts, and also hiked prices, while sacrificing volume. U.S. sales for the BMW brand were 58,365 in the first quarter of 2009, down 26.8 percent from the year-ago period, according to AutoData Corp. For all of 2008, U.S. BMW sales fell 15.2 percent to 293,795.

It was only stating the obvious, but BMW was quicker than other auto companies to admit last September that it was going to give up a 16-year streak of ever-higher sales in the U.S. market, and concentrate on trying to stay profitable instead. Sales will be down again in 2009, Pitney said.

BNET Auto Analyst Jim Henry interviewed Pitney at the New York auto show on April 8. Public days for the auto show run from April 10 through April 19, following Press Preview Days April 8 and 9. The following are edited excerpts from that interview:

BNET: Last year BMW went ahead and announced that you weren't going to try and buy market share, that you would try and protect profits instead. Is that still the strategy for 2009? Jack Pitney: Absolutely. We like everybody else are trying to get a handle on the economy and where the bottom is, and what our annual sales are going to be. I can tell you right now, though, that they will be less this year than they were last year.

BNET: You mean, 2009 will be less than 2008. J.P.: Our focus is profitability. That helps not only corporate profitability but it also helps dealers. We are not trying to push product.

BNET: Isn't it tougher to market luxury cars when people are cutting back? J.P.: One thing that helps a lot is that in January for the first time, CPO (Certified Pre-Owned cars and trucks) outsold new vehicles for the first time, and as you know, CPO are a good source of profitability for dealers and for us. We're focusing where the opportunities are in this economy.

That's also true with regard to service business. We're still committed to Ultimate Service (that is, free scheduled maintenance). That keeps customers coming back to the dealers for service, and in also insures that when CPO cars do come off lease that they've been well taken care of, and that protects residual values.

BNET: Speaking of residuals, you're doing a lot less leasing now, aren't you? J.P.: We're doing probably 15 percent less than years past, for instance in March I think it was about 45 percent (meaning it used to be 60 percent). The overall BMW Financial Services penetration (the percentage of BMW's sales and leases financed by its in-house captive finance company) is comparable, because people who aren't taking leases are taking loans with Financial Services instead. We are keeping people in the BMW Financial Services family.