Done at BMW But Now At Rolls-Royce, CEO Tom Purves Says Luxury Market will be Challenging
April 23, 2008

By Kate McLeod

Editor's Note: Auto Observer interviewed Tom Purves, chairman and CEO, BMW U.S. Holding Corp., in late March, as he still was scheduled to retire from the company. But this week, BMW announced Purves will remain, becoming CEO of the company's Rolls-Royce Motor Cars Ltd. division in the United Kingdom, starting in July. He spoke with Kate McLeod about his decades with BMW and the company's future in a toughening U.S. market.

Tom Purves has worked for BMW either 23 or 24 years. He can’t remember exactly.

In November, at age 60, he was scheduled to retire - but now will take over as CEO of BMW's Rolls-Royce unit. Purves leaves BMW as the company is dramatically expanding its production capacity in the U.S., and creating more niche vehicles. One is a stunning modernization of the iconic 2002, the 1 Series, and another, the X6, is so new it has no category or market. 

That may sound idyllic but the current BMW management in Europe is in shuffle mode, which creates chaos. “It is not really, in a sense, for me to make a judgment whether it is unusual or not,” said Purves about all the management changes in Germany. “We in America are just passing the baton.”

Purves passes along to Jim O’Donnell, the incoming CEO as of April 1, a strong German company that must sell cars in a weak U.S. economy.

AutoObserver asked Purves what happens to luxury German models if the exchange rate goes to even $1.70. “I don’t believe in the future the dollar will be as weak as it is today. I speculate that a new administration will be a point of inflection in the curve,” meaning the dollar will regain its strength.

Speaking of the risk to luxury German brands with the dollar as weak as it is, Purves said, “The scale is greater than we expected. We’re facing stronger headwinds. So we need a greater level of efficiency. It helps that we have an ability to cut out costs.” 

Purves noted BMW’s investment in the Spartanburg, S.C., plant has helped hedge currency fluctuations. Earlier this spring, BMW announced it will increase its production capacity in South Carolina to 240,000 vehicles by 2012 and hire 500 more employees, bringing investment in the U.S. to some $4.2 billion by 2012. BMW, which had almost 300,000 sales here last year, wants to expand its market and customer base by 50 percent by 2012. 

The expansion in Spartanburg is based on one of BMW's basic principles: Production follows the market. As the market expands the company invests close to its market. “That decision has a substantial balancing effect because we produce in dollars and customers spend in dollars,” said Purves. "Competitors of ours don’t have that benefit because they don’t manufacture in America. We decided in 1992 to build in Spartanburg and the group who made the decision was very familiar with currency drift. Our decision was to build close to the market and one of the reasons was to get a better balance of currencies.”

BMW has a similar approach in other markets that are growing — a joint venture in China and a small plant in India where it builds about 2,000 5 Series a year. “We sell more cars in the U.S. on a good weekend than we do in a year in India,” said Purves. Those markets are seen by every carmaker as lucrative future markets. 

“I inherited and leave in greater shape — not necessarily in better shape, but in greater shape, if I can say it that way — a strong dealer organization, the most demanded, most appealing premium brand and a group of people who are enthusiastic and more than capable of handling the future.”

So what are incoming CEO, Jim O’Donnell’s challenges? “Luxury vehicles are facing tremendous competition in the sector. We have Japanese players like Infiniti and Acura and Lexus, and Mercedes, too, who are not going to back down.” The challenge is heightened by the current market slowdown. 

Purves believes to succeed a company must excel in all aspects of performance, especially in a competitive environment. “You have to gauge the appeal of the existing portfolio, the needs of the customers and how you deal with them. You need a good leasing program because those customers tend to be very loyal. All in all, BMW has the competitive edge in great product, consistent marketing and excellent retailers. Competitors have one or two of those but not all three.”

Purves' appointment as Rolls-Royce CEO comes as no particular suprise, then, given he is young to retire by American standards. Some of this country's best business leaders are a decade or more older, so it would have been difficult to imagine such a vigorous man content to sharpen his golf game.

But he said his game is below par and he will spend more time golfing, but not all the time. Asked if he would stay involved in BMW, the answer is quick. “Why would I? Twenty-three years is a splendid period of time.”

Rolls-Royce is an arm of the BMW family, though - so in a sense, even after 23 years, he isn't totally going away. And Purves said he will always have an emotional attachment to BMW.

Photos:

1. Tom Purves (courtesy BMW North America Inc.)

2. Rolls-Royce Phantom Coupe (courtesy Rolls-Royce Motor Cars Ltd.)

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