Sales

Cadillac's Plan To Buy Out Half Of Its Dealerships Failed Miserably

Or it succeeded in that it proved how loyal these dealers are. Your choice.

A few months back we learned Cadillac was offering a bunch of its tiniest dealerships buyouts. By “a bunch” we mean 400 (43% of its dealerships) and by “tiniest” we mean that combined these locations accounted for just 9% of the brand’s total sales. Automotive News (AN), which broke the original story, has just caught up with the automaker to measure the success of its buyout offer. Depending on how you see the world it was either a gigantic failure or proof that Cadillac’s dealerships believe in the company’s new direction.

Of the 400 locations eligible to be bought out less than 20 accepted the offer, which ranged from $100,000 to $180,000. The buyout was offered as an alternative to accepting Cadillac’s new dealer incentive program, dubbed Project Pinnacle. Said project offers tiered incentives (there are five levels) based almost solely on sales volume. In addition to the change in incentives Caddy is also pushing its dealerships to make the buying experience more upscale. That costs money (updating and segmenting off showrooms, Italian suits, etc...), but apparently the investment was a better deal to most than the buyout. The good news is that those who reluctantly accepted the new world order won’t have to face it for a few more months.

Project Pinnacle was set to go into effect January 1st, but that has been pushed back to April to give dealers more time to prep. When asked about the low buyout acceptance rate, Cadillac president Johan de Nysschen took the glass-half-full view, telling AN it was "another proof point that there's a very high degree of engagement and optimism for the long-term prospects for the direction of the Cadillac franchise." Closing excess dealerships and updating existing showrooms and shopping experiences makes sense 100% on paper. But in practice it’s easier said than done, and the optics, closing down dealerships never looks good, are inescapable.

If anything this could spur Cadillac to move its ass on new models. It should still be at or near a total of 900 dealerships across the US. Those locations will need units to sell in volume. The new XT5 crossover is a good start and the Escalade has been and likely always will be a solid seller. But after that Cadillac’s sales take a deep dive, with all of its sedans posting negative year-to-year numbers. Johan De Nysschen blabbed about Cadillac’s all-out crossover assault earlier in the year. He might want to ramp up the timeline on that rollout.

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