Cadillac Dealers Voicing Concerns Over ‘Project Pinnacle’ Reorganization
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Cadillac President Johan de Nysschen has come under fire by multiple state dealer groups for the executive’s dealer reorganization program known as “Project Pinnacle.”
The reorganization has been branded by dealers as a way to cut off smaller Cadillac dealerships and put those dealerships at a major disadvantage.
Automotive News secured a copy of a strongly-worded letter to de Nysschen by multiple dealer groups. The letter, penned by seven state dealer groups, states the plan funnels money to larger stores in a disproportionate manner, leaving smaller dealers high and dry.
Project Pinnacle “picks winners and losers,” the letter stated. “The winners can make the required investments and prosper. The other dealers face business failure.”
A separate letter from the Automotive Trade Association Executives also opens fire on the plan, stating the tiered structure may conflict with state franchise laws forbidding price discrimination.
The report states de Nysschen has confirmed the receipt of the letters and plans to deliver a formal response to calm fears over the plan. However, the resistance is strong, with the letter asking de Nysschen to “rethink this entire program.”
The letter was signed by New Jersey, Connecticut, South Carolina, North Carolina, New Hampshire, Kansas, Wisconsin and metro Cleveland dealership association heads.
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This is just coming down to the fact the weak dealers need to culled and GM has few options other than programs like this.
In the N Ohio area there are too many dealers and it leave Cadillac with a smaller weaker system.
The other option is to buy them out but that is not cheap or easy either.
When the other Luxury brand have 1-2 dealers in the metro area Cadillac is stuck with 3-6 and they end up not making the money nor providing the service needed for the level expected.
The bottom line is to get to where they need to be some dealers will get hurt.
Think of it like a hand. Each finger is weak but formed together as one they become a fist that holds much more power and leverage.
Scott don’t disagree the network needs culled–current quantities it does. With that being said, Cadillacs only option will be to buy out the dealers whether they want to or not. If anyone thinks the dealers Cadillac wants to unload will just leave, you are far removed from reality . Either they are bought out or you will see lawsuits that will cost GM dearly. Do not claim to be a legal expert but many states have franchise laws that are going to make it difficult.
Sadly a portion of the $12Billion is going to have to be allocated here rather than on product!
You do realize how much this would cost?
Many of the things Johan declared on the way in … better dealership experience, fewer unprofitable dealerships, no mixing of Chevy/Cadillac or Buick or GMC, reduce or eliminate incentives, improved product and first-rate dealer experience…
He wasn’t wrong. He’s just run smack into the GM machine- moving to NY was a help, but pruning dealerships is akin to getting rid of players with guaranteed money on their contracts.
There will be blood, unfortunately.
SMALL RURAL TOWNS IN THE SOUTH ARE WEALTHY , AND CAN SUPPORT CADILLAC DEALERSHIPS .
POLAR OPPOSITE OF PROJECT PINNACLE .
OTHER WORDS: GO THE SMALL TOWN ROUTE .
CADILLAC DEALERSHIPS IN EVERY SMALL TOWN IN AMERICA !!!!!
TRUMP BECAME PRESIDENT !!!!
MAKE AMERICA GREAT AGAIN !!!
Maybe Cadillac should build compelling cars that are priced appropriately first and then decide whether they have too many dealers. GM has been trying to shrink their way to prosperity for 25 years and it hasn’t really worked. Instead of building competitive cars that could support their production and sales distribution networks, GM’s strategy is always to try and close or eliminate their way to success.
Cadillac has been building segment competitive cars for a few years now.
If they have, why can’t they sell them?
Escalade is arguably their most successful product but it’s nothing more than a Tahoe in a tux; a blinged-out Chevrolet swathed in leather and chrome. SRX has been their best seller but peal back the skin and one finds another Chevrolet. XTS is a disguised Buick LaCrosse (Epsilon II) replete with GM’s parts bin 3.6.
The Alpha cars, ATS and CTS, are much better efforts and more genuine Cadillacs but again propelled by the same engines found at a Chevy store and both have been a sales disaster. The Omega CT6 isn’t looking overly promising either. It was hyped extensively as a car that would whip up on the S Class, only to have its hype dialed back after Mercedes launched a new S. It’s short-changed by a cheap interior for the segment and again, the inadequate parts-bin engines. The lack of a V8 is indicative of a company not really dedicated to winning; even Hyundai managed a V8 for their luxury effort.
If GM would actually go all-out and produce a full line of top-notch, exclusive Cadillacs that draw from their own glorious heritage and history, instead of BMW wannabes, they might actually be able to support their dealer network. The problem is that they don’t need a lot of dealers when they don’t offer any cars consumers really want.
“If they have, why can’t they sell them?”
Easy: Cadillac as a brand is not currently viewed on the same level even if they are. That comes from many years of bad vehicles.
“again propelled by the same engines found at a Chevy store” That’s not true for all of them. The Cadillac I own has a twin turbo setup that is not used in any chevy.
You do make some good points, but the facts are that the ATS and CTS have been matching (and in some cases beating) the german competition in head to head matchups. Just building good vehicles will not turn a 100 year old company around, that’s just not how it works. You have to rebuild the brand image. You can build the best vehicles in the world, but if people still view your brand in a bad light then your cars won’t sell.
Not sure which engine you have but the LF3 Twin Turbo 3.6 from the CTS and XTS, for example, is merely a force-inducted version of the same LFX engine GM uses in pick-up trucks, SUVs and Chevy Impalas.
I’m suggesting they need a range of Northstar-like engines that would be exclusive to Cadillac and would serve as technology leaders for the company.
Other luxury brands use their engines that were originally designed by their luxury brands in their lower brand cars. Why should Cadillac be held to a higher standard than the rest of the luxury market?
Other Tier 2 luxury brands do this such as Infiniti and Acura. BMW and Mercedes do not. If Cadillac wants to truly compete in the luxury category they can’t put the same 2.0 Turbo four in their best car, the CT6, that can also be found in some of GM’s much cheaper cars.
Let’s not forget the CT6’s 3.0TT, which is NOT in any other GM build.
You may want to rethink you assessment about Cadillac. The XT5 is first to the platform and is not a reskin to Buick or Chevy for that matter.
And the engines which are shared with Chevy and Buick are used in Cadillac’s first before the bread-n-butter cousins got them.
Again, the engines are GM power trains owned and build by GM to share with many brands under the portfolio rather you like it or not.
It doesn’t matter whether I like it, the question is whether consumers like it and whether Cadillac’s strategy has lead to success in the marketplace and by most every metric imaginable the answer is no. Cadillac is in a very distant sixth-place in US luxury car sales with BMW, which offers a more authentic luxury car, being the number one seller. A BMW isn’t an upgraded commodity car riding around on a FWD platform from a low-priced model with the same engine as entry-level cars. It’s an authentic BMW with every part designed from scratch to execute the brand’s “Ultimate Driving Machine” credo.
Ask any person on the street what they think of Cadillac and the results won’t be pretty. After all the references to Grandpa and rappers will come statements equivalent to ‘nicer Chevrolet’. Cadillac isn’t going to shake the ‘nicer Chevrolet’ image without more differentiation, exclusive platforms (which they now have with Alpha and Omega), exclusive engines, dedicated production facilities, and a unique persona.
Cadillac has made strides to update their image with the V Series cars, and no doubt those models are good but a CTS-V is really just a wannabe BMW powered by an OHV LT4 from another Chevy. Certainly cribbing parts from a Corvette is better than lifting an engine from the Malibu (CT6 2.0T, among others) but it still isn’t what’s needed to project the kind of rarified, sophisticated image a luxury brand like Cadillac needs.
Again, with better products, their sales network could be supported. The primary issue is that the cars don’t sell so if nobody wants what they are offering, they don’t need a lot of dealers. A better alternative, in my opinion, would be to build the kinds of cars people stand in line to get. If they do that, their large dealer network wouldn’t be such a problem. In 1979, Cadillac sold 381,113 cars. Last year, they sold 175,267, which is well over half of what they sold 35 years ago. Therein lies the primary issue; their dealer network was built to support a lineup of cars that performed better in the marketplace.
“the question is whether consumers like it and whether Cadillac’s strategy has lead to success in the marketplace”
Actually the question was whether they built quality cars. The answer to that was yes. The point you made in your original comment that I responded to had nothing to do with sales numbers, and sales numbers have nothing to do with the quality of the car.
If you build it they will come!
As a Rural mid- west Cadi owner & father of a Long Island Cadillac owner I Know first hand that My small town Cadillac Dealership/Service experience is superior to the one driving my Daughter back to the saturated foreign car market of Long Island. As a Retired and dedicated to “continued improvement” General Motors employee, I plead to GM CEO Mary Barra & Cadillac President Johan de Nysschen to work to achieve a “World Class” relationship between the Corporation/Divisions and a Dealer Network still recovering from a too often Ham Fisted and ill planned Bankruptcy. Cadillac is Our Leader in Design, but a short sighted effort to separate and build the brand misses a fundamental. The location of Cadillac Headquarters to New York should be leveraged to understand and improve a area service/sales experience that is broken and goes deeper than a facility. Without the involvement/commitment/belief of Your People in meeting customer expectations making more dealers losers will miss the opportunity for Cadillac to truly lead in All markets. signed, Mark Ehrle
Cadillacs smaller dealerships are at a disadvantage because they are up against these mega -stores that sell different brands as well . The higher the prices of Cadillacs really forces dealerships to bring in other brands or they won’t survive . It really is coming down too how many cars you sell on an annual basis and they will get the majority of the funds . JDN needs to tread lightly here because customers are not going to drive 50 plus miles to by a car .
The bigger the city ( like Detroit ) the more dealerships there should be , It should come down to the size of the population and the income level of them .
In my city the only Cadillac dealership was bought out by a MEGA – store that even sells Hyundai’s right next to Cadillacs . And this family owns dealerships all over mid-Michigan selling cars from just about every car company out there . He will get a lion share of the money for re-investment in his facilities and how is the smaller store to compete for their share , it won’t happen . It all depends on how much metal you move .
The problem is simple too many stores and they all suffer. Less stores you end up with better profits and stronger stores that can afford to do all the things needed to serve the customer at a level not reached today.
No one said the small town dealers are bad it’s more a thing of limitations and profits. the less dealers the stronger the network dealers become.
Now if you are going to sell luxury cars where would you do it in a small town or a large metro area? Well that is a no brainer and most customers are in large metro areas.
As for the higher Prices and profits per vehicle many dealers can live stand alone. I have proof of that here in my area with a stand alone GMC dealer. They lost Pontiac and were worried but at this point they are more profitable and the average selling price has been over $60K per unit sold. The GM there is pleased and GM has really been happy with them.
They even were able to pay for the make over of the dealer win minimum GM assistance unlike other dealers.
Now I do have a local long time Cadillac dealer here that is stuck in a empty down town with no local access to any freeway. This is a real killer. Also it is not a great part of town. They rebuilt where they are but I feel they have put themselves at risk because of where they are. They really should have relocated. I know it is not always easy or cheap but they are also putting themselves at risk.
The bottom line is being a dealer is not easy and the system has many inherit issues where things were done wrong and today they need corrected not only on the dealer side but GM.
GM needs less dealers across the board. They also need them in more strategic places. With the high number of dealers it hurts many of them. Also with so many dealers family owned for decades it hurts as many have a heritage but they also have not kept up with the changes as well as they should have or just flat refuse because they either can not afford to change or want to change.
One has to look at this unbiased and look at the big picture to what would help GM as well as the dealers that should remain and grow stronger and more profitable.
I expect with time more dealers to sell out to larger chains with GM assistance. They will consolidate many. Those who try to remain in the old ways will struggle even more.
I had a small Chevy dealer near by and they did a good job but it just got to the place they could no longer compete anymore at prices the others offered or even in the area of service. They sold out and the dealer that came in is not doing any better off the beaten path.
Another dealer in a remote town sold to a Chain and they have thrived. Prices are better and inventories never larger. I hate to see the small town dealer fade but like many things in life if you do not keep up you will suffer.
Cadillac made the decision to hand out the dealerships across the country years ago. Only Cadillac had that right and it was 100% their decision. This new program is a disaster to not only small dealers but mid size single line Cadillac stores as well. The enforcement actions of the program are almost a police like tacit and appear designed to easily fail most of the dealers for the additional percentage they could possibly earn. This plan is 2 years early. Cadillac has only 2 new products, the 2016 Escalade and the 2016 XT5 and neither are really selling any better now then they did in the past replacement products. Cadillac product line is packed with sedans in a truck and SUV market. Cadillac’s next new product is late 2018. This new program or one similar ( dealers agree with ) should be phased in over a 2 year period to match the new products and less stress and pressure on the current dealer body. The program is also set to to save Cadillac money by not paying dealers any revenue they earned from the program until 15 days past the quarter creating a huge cash flow issue. This program needs to be stopped re-worked and delayed until the time is right backed by new and improved inventory
Cadillac authorized the Dealerships! If Cadillac now wants to eliminate them it seems they will need to buy them out!
Otherwise they will likely face significant lawsuits.
Ed if it were only that easy.
You can take the $12 billion and design a whole bunch of new product or you can use it to buy out dealers. What would you chose?
This is just why Tesla is trying to go around the dealer network and why all those MFG stuck with it are trying to force them into it. They can not afford the buy outs and they do not want anyone coming in with out the same rules applied.
It is not Tesla they are worried about but China when they do start to import their own homeland cars at some point in the future.
GM already imports Buicks from China and a Chinese-built Cadillac CT6 hybrid is waiting in the wings and will soon be sold in America.
Chinese cars aren’t something that are coming. Thanks to GM, they are already here. Maybe that’s why JdN wants virtual dealers with no inventory; it makes it easier to hide the Made in China label until the poor customer has already bought the car.
Never say never.
They said the same about televisions.
Enjoying you Samsung or Sony?
The Chinese will come at cut rate prices that many will not refuse.
Cosco and Walmart rode this same wave
Let me put this more simply
The excess dealers and poor prorfroming dealers are like a tumor. Harsh but true as they are hurting the rest of the body
The Pinnacle program is like Chemo. It is designed to kill off the tumor or offending cells that make up the dealer body and leave only the strong cells to survive.
When all the dealers were handed out things were much different 100-50 years ago. The market has changed and the way Luxury cars are now sold has changed. The problem is the franchise system hurts Corporations adjusting to the market changes. It is kind of like a one way door and once you get outside there is no way back in even if the weather has gotten colder and you can not get a coat now.
The government regulations never took this into account and the only way out is to buy out franchises at crazy amounts.
The good part of this is some bad dealers will go away. The bad is some smaller good old dealers will fade away. If anything they may move to another brand that may help them improve their income as they will not be competing with so many other dealers.
This will be a painful step like a divorce but it is something that needs to be done. You can either have a stronger smaller dealer network or you can have a large half ass dealer network.
I also expect the surviving dealers will be also held to a much higher standard as they should be. Some may not like it but if you want the best you need to set standards and stick to them.
Understand your point, but realize that chemo and divorce cost money. Money to the other party that is!
It is what it is. It is ugly but the only path that will not hit the budget to where it hurts new product investment.
No one ever said business is clean and easy. Sometimes you have to play tough to survive.
The lawsuits will come and to settle them it will be cheaper than buying them out.
At times you have to lose a finger to save a hand.
Sorry I just had a lot of metaphors for this tonight. LOL!
Since this is part of JDNs turnaround any legal defense fees and settlements need to be charged against the $12Billion. Why should Chevy, Buick, GMC or Opel have to pay for something that benefits Cadillac only? There should be no big black cash box somewhere in GM that fund this!