GM Offers Buyouts to 400 Cadillac Dealers
September 23 2016 - 5:11PM
Dow Jones News
By Mike Colias and John D. Stoll
General Motors Co. is moving to cull the ranks of Cadillac
dealers, offering 400 owners of its smallest luxury-vehicle sales
outlets a modest buyout as it reshapes the brand's image to better
compete with rivals.
The Detroit auto maker will provide as much as $180,000 in
"transition assistance" to U.S. Cadillac dealers unwilling to
invest in a set of new standards introduced by brand chief Johan de
Nysschen. Cadillac has 925 dealers, and the 43% being offered a
buyout typically sell fewer than 50 models a year.
Dealers were informed of the buyout plan on Friday. They have
been working with GM management on a brand overhaul for several
months and suggested the company offer a buyout to dealers not
wanting to make investments in store upgrades, the spokesman
said.
A spokesman said the buyouts are optional and available until
Nov. 21. Many of the affected dealers have Cadillac stores coupled
with other GM brands, such as GMC or Chevrolet.
Cadillac sales volumes have fallen far behind German auto makers
and Toyota Motor Corp.'s Lexus brand in the U.S. in recent years
despite substantial investment in the product line. Mr. de Nysschen
has said changes need to be made to the retail network, and earlier
this year rolled out a plan called Project Pinnacle to address
staffing, service and other operational details.
BMW AG, Daimler AG's Mercedes-Benz, Audi AG and Lexus each have
about a third as many dealers in the U.S. as Cadillac. While lower
dealer counts mean these brands have less geographical reach, the
stores have higher sales throughput that typically leads to richer
dealer margins and more willingness by store owners to invest in
upgrades.
Cadillac U.S. sales this year through August of 103,000 are down
6% compared to the same period a year ago. Lexus, BMW and
Mercedes-Benz all have sold more than double the volume over that
period. Cadillac once only battled Lincoln for dominance in the
U.S. luxury brand, and is now dependent on sales in China for
growth.
Mr. de Nysschen's Project Pinnacle comes seven years after
bankruptcy and is designed to organize dealers in tiers, a strategy
that has been met by some disapproval by dealers accusing the
executive of unfairly targeting smaller stores. Prior to the buyout
offers, low-volume dealers were given the option of having
inventory-free virtual showrooms.
The specifics of the buyout program were first reported by
Automotive News.
Write to Mike Colias at Mike.Colias@wsj.com and John D. Stoll at
john.stoll@wsj.com
(END) Dow Jones Newswires
September 23, 2016 16:56 ET (20:56 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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