Report: Cadillac Offering Buyouts to 40 Percent of its Dealerships

Cadillac is offering to buy out 400 of its smallest U.S. dealerships, reports Automotive News. Dealers who are willing to walk away from their franchises will receive between $100,000 and $180,000.

The luxury brand is only offering the buyout packages to dealerships that sold fewer than 50 new retail vehicles last year. Still, about 43 percent of Cadillac’s dealerships fall into this category, and together, these franchises only contribute 9 percent of the marque’s total sales. Cadillac’s outspoken president, Johan de Nysschen, admits Cadillac has too many dealers compared to its competitors, but insists he isn’t looking to cut these stores.

“Our target is to have 100 percent of the Cadillac dealers engaged with the Cadillac business,” de Nysschen said in an interview with Automotive News. While he hopes there are no defectors, de Nysschen said the buyout plan is intended to give dealers an out should they not want to participate in Cadillac’s controversial new Project Pinnacle program. The plan, which goes into effect next year, gives larger stores hefty incentives if they spruce up their dealership with new services.

Under Project Pinnacle, Cadillac dealerships are separated into five tiers based on how many vehicles they sell. Tier 1 stores, which typically sell many vehicles, will receive the highest incentives for providing extra features such as concierge sales and service pickups. The lowest-tier stores wouldn’t have to meet these strict requirements, but would be expected to give up stocking cars. Instead, they would direct customers to order vehicles through virtual showrooms. Cadillac says the program is completely voluntary, but that hasn’t stopped dealers from claiming the program is unfair. Offering bigger incentives to the largest stores will allow them to sell their vehicles at lower prices than smaller stores, critics say.

Last year, de Nysschen first announced big plans to improve the customer experience at its dealerships. The plan is to bring “high-technology showrooms” and a number of other upgrades to its dealerships to bolster the brand’s luxury image.

Dealers have until November 21 to decide whether they want to give up their franchises, AN reports. If they take the deal, they would have until the end of 2017 to close up shop.

Source: Automotive News (1, 2) (Subscription required)

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