Cadillac executives presented Project Pinnacle to dealers during the brand’s national dealer meeting in California in February. A comprehensive overhaul of the system by which Cadillac incentivises and pays dealers for new-car sales scheduled to go into effect this fall, Project Pinnacle binds dealer compensation to several metrics such as sales and customer service, among others measures.
According to the chairman of the Cadillac National Dealer Council, Will Churchill, the goal was to ensure that the program:
- Is not mandatory, but rather voluntary
- Does not include a stair-step component for sales
Stair-step components of sales programs award dealers tiered bonuses for hitting ever-growing sales thresholds, which “result in dealers beating their brains out to sell those extra few cars,” Churchill told Automotive News. “This is not that at all”, added the 39-year-old dealer principal at Frank Kent Cadillac in Fort Worth, Texas.
Other components of the Project Pinnacle scheme include a voluntary facility image program, a change in the way that Cadillac pays out for car sales, the way that sales objectives get set, and a focus on sales of Certified Pre-Owned vehicles.
Facility Image Program
Cadillac executives floated a new facility image program under Project Pinnacle. Ironically, many dealers have only completed renovating their facilities under a previous program.
The facilities program under Project Pinnacle, however, is voluntary.
Project Pinnacle repositions a significant amount of margin that had been built into a new-car sale, such as holdback, floorpan, credits, and more.
“The Cadillac dealer council’s opinion is we should be paid to sell cars, not paid to take cars. That aligns with [Cadillac President] Johan’s view, and we totally support it”, Churchill told Auto News in an interview.
Setting Sales Objectives
Another interesting element of Project Pinnacle is the way the sales objectives for individual dealers gets set. Churchill says that Cadillac President Johan de Nysschen would like to see the process of determining a dealer’s sales objective as a collaborative measure. Even so, that might to be possible in the way Cadillac operates within GM:
“I think that’s his desire”, said Churchill referring to de Nysschens. “But from a legal standpoint and working with GM, I don’t know if they’ll be able to have such an open architecture in terms of determining objectives.”
Auto News also asked Churchill whether there is anything different about the way vehicles will be allocated to dealers. Allocation is a process by which dealers can request (order) and receive vehicles from GM/Cadillac, usually as a result of a sale.
One of the more common gripes with the process is that dealers often can’t get enough product from the factory to hit their sales objectives, as was the case during the launch of the current,-gen, 2015 Cadillac Escalade.
In replying, Churchill stated that Project Pinnacle is not a stair-step program.
“I think the key with this program is that it’s not a stair-step. It’s designed so that every dealer has the opportunity to get the same amount of money. It just depends on their level of commitment to Cadillac, through customer-facing touch points and that sort of thing. Your planning potential puts you on a landing pad, but you can move up the scale to any level that you want.”
He added that “… that’s a big difference between the conventional stair-step. That was a big deal for the council to set it that way. And I think that was a big win for the dealers.”
Refocusing On Certified Pre-Owned
Another focus item under Project Pinnacle is sales of Certified Pre-Owned (CPO) Cadillacs. Though CPO sales were a big focus several years ago, the effort lost momentum before being changed, causing some dealers to lose faith in Cadillac’s CPO program.
Churchill noted that there will be a lot of lease returns starting at the end of this year through 2018.
“If we don’t have a robust CPO program, we don’t have a way to dispose of these off-lease vehicles without sending them to auction,” he said.
When a vehicle goes to auction, it degrades residual values — which currently is another problem area for Cadillac.
“We as dealers need to be more responsible for our lease turn-ins and keep them out of the auctions so we’re not competing with CarMax and others,” Churchill concluded.
New Wave Of Vehicles
Starting this year, dealers will have two new vehicles to sell — the 2016 Cadillac CT6 full-size sport-luxury sedan, which launched in March, as well as the 2017 Cadillac XT5 midsize luxury crossover, which launches later this month as a replacement for the popular SRX.
After that, Cadillac will go on a product hiatus and not introduce any new vehicles until 2018, when a new product onslaught is expected to begin. Until then, Caddy dealers will have to make due with the current portfolio of products as the brand establishes more business discipline.