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BMW's U.S. Challenge: Selling "Ultimate Driving Machines" that Sip Gas

The BMW 5-Series hybrid as a concept car. The goal is frugal performance.
BMW is in an enviable position in the U.S. market. Its beating its arch-rival Mercedes, and now occupies the top spot in U.S. luxury sales. But all is not as it appears, because the company's luxury cars tend to be gas guzzlers, and if it's going to reach non-negotiable federal fuel economy targets BMW needs to think smaller.

That's going to be a big challenge for the new German-born honcho of BMW's North American operation, Ludwig Willisch -- who spent some formative years in the automaker's M performance division in Munich.

BMW needs, and seems poised to get, fewer "ultimate driving machines" and more cars that combine great performance with close attention to bottom-line economy. The good news is that BMW has plans for vehicles like that. It's rolling out hybrid versions of both the 3- and 5-Series. And a new line of four-cylinder, front-wheel-drive should find ready buyers in a world of $4 a gallon gas.

Performance isn't everything
BMW can't just play just to readers of Road & Track anymore. By the 2016 model year, it and other companies have to average 34.1 mpg on the American market, and European rules are ramping up, too. The company's engineering is famous, but reality dictates borrowing some fuel-sipping tech from Mini. Front drive and four cylinders are, of course, anathema to some BMW purists -- "BMW with FWD? We can wait," says egmCarTech -- but, along with a continued emphasis on high-end luxury, it's the wave of the future for the company.

Buoyed by the new 5-Series sedan and good SUV sales, BMW moved 113,705 cars in the U.S. during the first six months of 2011 to outsell Daimler (110,926) and become the best-selling luxury brand. And it appears likely to top Lexus in 2011 sales. BMW has predicted a 12.5 percent sales increase for the year.

But even as luxury leads, the company is also moving downmarket. According to Norbert Reithofer, chairman of the board of management at BMW:

In the future, we intend to participate even more in the growth of the small car segment. This is why we are planning to offer smaller BMW models -- positioned below the 3-Series -- with front-wheel drive. These models with front-wheel drive will also be made available to our customers with a hybrid engine.
The new budget BMWs will probably debut next year. The gearheads and purists probably won't like them, but they're quite likely to be fun to drive, with highway mpg in the 30s.

Clueless on hybrids
BMW's hybrid strategy has so far been a mess, and it has sold very few of its ultra-expensive ActiveHybrid X6 Crossover cars in the U.S. Small wonder, since the 485-horsepower behemoth costs $89,725, yet delivers just 18 mpg combined. BMW should jettison that car, no matter how much sense it made for the American market on the drawing board in Munich.

The hybrid version of the new 5-Series should do much better, but its timing is unclear in the U.S. BMW has showed off a 5-Series ActiveHybrid concept, mating a turbocharged three-liter six with a 40-kilowatt electric motor. The production version was rumored to hit these shores this year, but hasn't arrived yet (though spy versions have been spotted in California). A plug-in hybrid will also be sold -- at least initially, in China only. There's a hybrid version of the 3-Series coming, too, and that one should have really good fuel economy.

A time of transition
Jim O'Donnell, BMW's CEO in North America, is leaving on a high note in October, to be replaced by Willisch, an executive with 15 years at the company. The former president of the company's high-performance M division, Willisch also has extensive sales experience in Europe and Japan, and that's undoubtedly what landed him the top U.S. spot. He knows the company needs successful small cars, much as he might want to talk about the competition package on the M3.

According to BMW spokesman Kenn Sparks:

Willisch isn't coming directly from the M division, but from a position as head of sales in Europe. He's completely experienced in the marketing of the whole range of BMW vehicles.
Willisch will also have to strategize BMW's American electric strategy, and here again he has to think small. The i3 "Megacity" vehicle due in 2013 rumored to start at $35,000, which seems rather high, but its reported 160-mile range gives it an edge not only over the Nissan Leaf but also over rival Mercedes' Smart electric drive (and it's a four-seater, too). A reasonable lease price will really move the i3.

BMW has a credible plan to reorient its American product line. It just has to implement it.

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Photo: BMW
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