Cadillac Extends Buyout Option To U.S. Dealerships
Either take the money or sign up for the new Project Pinnacle incentive-based programby Kirby Garlitos, on
Cadillac is giving its smallest U.S. dealerships an opportunity to give up their respective franchises in exchange for financial considerations amounting to anywhere from $100,000 to $180,000. The offer is tied into the automaker’s new incentive program known as Project Pinnacle, which was created to streamline all of Cadillac’s dealership into a five-tier program that distributes incentives to dealerships based largely on their respective sales volumes.
According to Automotive News, 400 dealerships have been offered buyouts to relinquish their franchises if they’re hesitant on joining Project Pinnacle. If they refuse to take up Cadillac’s offer and choose to remain open, they’ll have get on board with the new program and all of the new requirements that come with being a part of it. Details on what the specifics of those are requirements are have yet to be revealed, but the general idea is that dealerships will be separated into I’ve tiers based largely on sales volume.
Dealerships with higher sales volumes earn the biggest incentives, although the position also comes with the most stringent standards. Conversely, smaller dealerships will have more relaxed requirements to meet, with the caveat that they can’t stock vehicles on site, thus relying more on a virtual showroom approach to draw in would-be customers.
Cadillac president Johan de Nysschen told Automotive News that so far, 474 dealerships had already enrolled in Project Pinnacle, including 80 dealers that were eligible to receive the buyout option. The total already represents 83 percent of Caddy’s overall sales volume. Those who have yet to decide between signing up for Project Pinnacle or taking the buyout package have until November 21 to make a decision.
Continue after the jump to read the full story.
Why is Cadillac taking this approach?
The short answer, at least coming from Cadillac president Johan de Nysschen, is that Cadillac wants to have a more engaged dealership network that will get on board with the new program. It’s a simple response, but it’s also tied into a number of factors that the company wants to address. One of these factors is the amount of Cadillac dealerships around the country, something that de Nysschen admitted is “too many” relative to its biggest rivals.
All of the dealers eligible for the offer sold fewer than 50 new Cadillac models in 2015 and what’s worrisome from Caddy’s perspective is that these dealers represent 43 percent of the brand’s 925 dealerships in the country, yet they only accounted for about nine percent of the total company’s total sales volume. In other words, there are dealers that aren’t pulling their weight in selling models and as a result, they’ve been deemed as expendable if they don’t buy into the Project Pinnacle program.
Granted, there is a counter-narrative that’s being spun to highlight some of the holes attributed to the new program, one of which is that it’s inherently unfair to small dealerships who are likely to lose the ability to stock cars on-site if they sign up for Project Pinnacle. According to Automotive News, dealer associations in California, Virginia, and other states have already objected to the plan, arguing that the program itself also violates franchise laws, something that de Nysschen responded to by saying that these accusations are largely based on “misinterpretation.”
Objections notwithstanding, de Nysschen remains confident on the feasibility and fairness of Project Pinnacle, arguing that under the new program, “every single Cadillac dealer will have the potential to earn significantly higher profits than they do today.”
While that point remains to be seen, there’s no denying that the company is taking this approach to become more in-tune with its status as a luxury brand that’s hoping to regain its status in the U.S. market. Whether or not Project Pinnacle eventually leads down that road is a different matter altogether.
Source: Automotive News