One of those nice problems

Demand for BMW vehicles outpaced their supply Mind you, BMW of North America Inc. CEO Tom Purves isn't complaining about how things went for the importer in 2000.

In fact, he says, it was a "brilliant year" for North American sales. Those reached about 185,000 units. That's a record for the German luxury car maker, and 19% better than 1999. "2000 was much stronger than we anticipated, says Mr. Purves.

But there was a problem. A nice problem to have. But still a problem which presented what Mr. Purves calls "internal challenges." The supply of BMWs in America couldn't keep up with the demand.

No manufacturer wants inventory piling up. But at one point in early 2000, BMW inventory was at an incredibly low 11-days' supply. That isn't making available a reasonable selection of cars, says Mr. Purves. It's essentially ordering cars off the factory production line.

"We could definitely have sold more cars if we had greater availability," says Mr. Purves. "It's extraordinary to think how many cars we might have sold if we had full availability...We did lose business earlier in the year. But all in all we're happy."

Much of BMW's phenomenal success in 2000 centers on the importer introducing a complete range of its 3 Series cars as well as a new sports activity vehicle, the X5.

Overall auto sales dropped in November by 3.4% for the industry in total compared to year-ago. But BMW sales were up 31% that month compared to the previous November.

The predicted economic slowdown for this year will affect BMW, too, even though the order books look "pretty good" for 2001, says Mr. Purves.

"The industry can't carry on growing at 5%-7% every year," he says. "This was bound to slow down. We're looking at a much more normal level of growth which would give us an opportunity to grow the business on a brick by brick basis rather than have it almost run away from us."

That less intense growth is in many ways more acceptable from a management and service-delivery perspective.

Says Mr. Purves "If you are selling 20%-30% more cars, can you really provide the type of service you expect to? Where are you going to get the people to handle those increases in sales? Or to handle the increases in parts and services?

"We managed to do a good job in customer satisfaction this year, but a lower rate of growth would be a more sustainable position both for the business - wholesale and retail - and for the customer who would be sure he can get first class service."

Despite 2000's sales surge and its accompanying problems, BMW of North America and the country's 350 BMW dealers won a top J.D Power and Associates award for overall excellence both in product and in customer service.

"There's a time when consumers differentiate between not only what they buy but also the service they get and the integrity of the people they deal with," says Mr. Purves, a veteran of Rolls Royce.

BMW invested significantly over the last 18 months, building new engineering and training centers in California and a new parts warehouse distribution center to serve Sunbelt dealers.

BMW dealers likewise in 2000 invested significantly in their businesses.

Says Mr. Purves, "It's not just an investment in bricks and mortar, but also in the quality of people. We are engaged with retailers in finding ways to make BMW franchises the best places for employees to have a retail career in the motor industry."

BMW for some time has sponsored a program to recruit and train dealership mechanics, taking them from apprentices to master technicians.

Such training will soon expand to sales and after sales in an effort to enhance the appeal of working at a dealership, says Mr. Purves.

"For us, up to 2000 we concentrated a lot on brick and mortar projects," he says. "After 2000, it will be a lot about human beings."