SHERIDAN, WYOMING – Feb. 27, 2025 – When BMW of North America took over from Max Hoffman on March 15, 1975, it inherited the dealer and distribution network that Hoffman had been building since 1962. Hoffman’s dealer directory of April 1967 listed 129 BMW dealerships and six independent distributors in charge of specific geographical territories. Though the network covered the entire US, dealerships were concentrated in the Northeast and on the West Coast: New York had 23 BMW dealerships, California 24. Vast areas of the country were entirely unrepresented; Texas, for example, had no dealerships at all.
Early Expansion and Challenges Under Hoffman
After the 1600-2 and then the 2002 became unexpected hits in the US, Hoffman nearly doubled the number of BMW dealerships over the next eight years. More didn’t necessarily mean better, however, especially as Hoffman awarded dealerships in a less-than-scientific manner. In Burlington, Vermont, he reportedly offered a BMW franchise to a man who’d replaced the dead battery in his car late one Friday evening. In Tacoma, Washington, Hoffman charged Werner Scharmach just $1,500 for the signage and other equipment needed to become a BMW dealer. In Milwaukee, Wisconsin, he required Harold Zimdars to order just two BMWs to become a dealer.
“In the Northeast, we had a lot of small dealers, some with really inadequate facilities and almost all selling other brands,” said Tom McGurn, BMW of North America’s first public relations manager. “The West was better, but the Southeast had been almost forgotten. But there were some large-volume dealers, too, like Peter Pan in San Mateo CA and Knauz in Lake Forest, Illinois, near Chicago.”
Bill Knauz became a BMW dealer in 1971, after writing Hoffman a letter and then introducing himself to Hoffman’s sales manager (and brother-in-law) Michel Melamed at the New York Auto Show. Knauz’s dealership—established by his father Karl in 1934—already sold Mercedes, Citroen, and NSU, and he was looking for another line of small, low-priced cars. “I was ready to fight to get this franchise, and when I walked in Melamed said, ‘Well, Mr. Knauz, how many cars do you want in your first load?’ I had no financial arrangements, but he told me not to worry about that. ‘We know Lake Forest. I’ll send you sixteen cars.’ That was my negotiation for a BMW franchise.”
By the time BMW of North America took over US distribution from Hoffman in March 1975, Knauz’s dealership was one of around 250 in the country. A handful declined to carry on under the new regime—for some, it required a significant investment to meet BMW’s standards for corporate branding and presentation—but most agreed, and more dealerships joined the roster. When BMW NA published a new directory in September 1976, BMW automobiles were sold in 295 dealerships, some serving previously unrepresented areas of the Midwest and Southeast.
Transition and Transformation Under BMW NA
Adding more dealers was one thing. Improving relations with dealers was another. Hoffman had paid a significantly lower margin (14.2 percent) to BMW dealers than they could earn by selling Fiat or Volkswagen (16 and 20 percent, respectively), and he was inconsistent when it came to honoring warranty claims and stocking spare parts. “If Max didn’t pay warranty, I had to make it work out,” said Lee Maas, who began selling BMWs at his Classic Cars dealership in Dallas, Texas in 1970. “If he was short on parts, I made sure we had the parts to fix most anything on the car.”
Knauz echoed Maas’ complaints about Hoffman’s business practices—“He didn’t pay you properly on parts, service, warranty work, etc. He wasn’t too interested in what happened after he sold you the cars”—but said he had a good relationship with Hoffman himself. “After my father died, I became a pseudo-son to Max. He’d call me almost every Friday, speaking only German. ‘Why don’t you buy some more Bavarias?’ I’d say, ‘Max, I just bought two loads of Bavarias! I don’t need more.’”
As odd and informal as that relationship may have been, Knauz said it was preferable to what followed in the immediate aftermath of Hoffman’s dismissal. “I was not happy at all with BMW NA,” Knauz said. “The people they put in charge… They wanted to do business in a businesslike manner, while Max did business on a handshake. You couldn’t trust the handshake, but…”.
McGurn remembers it slightly differently. “Knauz embraced the businesslike approach, but his one caution was to move strategically rather than too quickly to get on a par with Mercedes, Volvo, Audi and other brands.”
Indeed, the new organization was nothing if not businesslike, to the benefit of the vast majority of its dealers and customers. Under the leadership of its first CEO, John Cook, BMW NA improved dealer margins and sped up the processing of warranty claims. The company also began holding dealer meetings, which Hoffman had refused to do.
“Hoffman did not believe in dealer meetings,” said Bob Lutz, BMW AG board member for sales from 1972 to 1974. “I said, ‘Maxie, we’ve got to have a dealer meeting, generate some enthusiasm, outline our marketing plan.’ He said, ‘Bob, you never want to get all the dealers in one room. That’s one of the rules. Because then they start comparing notes, and they figure out that I do things for some of them that I don’t do for others.’”
By contrast, BMW of North America began bringing its dealers together in late spring 1975. “We wanted to introduce the management team and present our plans to increase brand awareness and sales volume, and to support dealers and customers,” McGurn said. “Communication with the dealer organization was critical. Dealer councils were common in the industry, and we appointed the first dealers to our Dealer Forum that met twice a year and discussed their issues. Once organized, the dealers elected their own representatives. Some of the dealers were visionary, asking for a competitor to Mercedes’ S-class or for more technical support, as well as support from the company in the form of parts and service, sales and promotion.”
Navigating Growth and Competition
BMW of North America began advertising more heavily than Hoffman right from the start…and more effectively, too. A new tagline, “The Ultimate Driving Machine,” captivated enthusiasts, and so did BMW Motorsport’s successful campaign with the 3.0 CSL in IMSA racing.
In his first interviews with the US media, Cook told journalists that BMW of North America hoped to sell 18,000 cars in 1975. Instead, it sold 19,419, followed by 26,040 in 1976, and 28,776 in 1977. Sales would grow steadily for the next decade, a welcome development that nonetheless created challenges for the young organization and its dealers.
“The company grew perhaps too fast in those early days. BMW was the ‘in’ product to have, and the infrastructure couldn’t keep up with sales,” said Larry Demski, who joined BMW of North America as an engineering workshop technician in 1977.
Adding to that challenge, the first cars to arrive following the establishment of BMW of North America were far more sophisticated than their predecessors, incorporating more electronics than ever before.
“The technology on the cars was changing—we were among the first to have ABS, and airbags—and when the technology failed, we didn’t always have the infrastructure to repair it,” Demski said. “People would complain if the car couldn’t get fixed, or they couldn’t get parts. ‘It was billed as the Ultimate Driving Machine, but it doesn’t drive!’ The dealers would try, but they didn’t have the right diagnostic tools, or the right training.”
In the meantime, BMW of North America had expanded its sales network to some 400 dealerships by the end of the 1980s, which McGurn said was “way too many” for the number of cars being sold in the US. Compared to dealerships that sold other marques, BMW dealerships sold far fewer cars on average, limiting profits as well as each dealer’s ability to invest in and improve their business. This problem became especially acute when sales volume began slipping in the face of exchange-rate challenges and new competition from Japan: From 96,759 cars in 1986, annual sales fell to just 53,343 cars in 1991.
Modernizing the Dealer Experience
That period saw BMW NA and its dealers come under pressure from the introduction of new Japanese luxury brands, of which Lexus was the most successful. In lieu of a storied brand history, Lexus staked its reputation on a customer-focused dealer experience. Selecting the best and the most dedicated Toyota dealers to create separate showrooms and workshops for its new luxury brand, Lexus was able to build a right-sized dealer network while setting a new standard for customer care. Lexus’s commitment to customer service inspired a more customer-focused experience within BMW NA and its dealer organization; interestingly, since the new.
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