Dealer Groups Cry Foul Over Cadillac's New Retail Plan
August 08 2016 - 5:46PM
Dow Jones News
By Gautham Nagesh
Groups representing several Cadillac dealers are urging General
Motors Co. to rethink a new retail strategy for the luxury brand,
saying the plan is an attempt to steer around dealer franchise laws
that have long prevented auto makers from closing dealerships.
In a letter signed by dealer associations from seven states,
Cadillac President Johan de Nysschen was accused of creating a
program that they consider "is the most serious attack on their
survival they have seen." Mr. de Nysschen has been in the process
of rolling out "Project Pinnacle, " which aims to classify dealers
into five groups and limit the inventory or showroom space that the
smallest dealers need.
Project Pinnacle would result in the creation of virtual dealers
where the smallest dealers would have no inventory and rely on
virtual reality headsets for much of the sales process. Many of
these stores would be rural Cadillac dealerships that sell less
than 100 cars annually.
While GM significantly reduced its dealer count in bankruptcy
court seven years ago, its 925 Cadillac stores vastly outnumber the
dealer bodies for luxury rivals selling far more cars, including
BMW AG and Toyota Motor Corp.'s Lexus brand. GM had flirted with
closing more Cadillac stores, but opted to keep the footprint large
because of the brand's unique access to rural markets where foreign
luxury brands weren't represented.
State franchise laws limit GM"s ability to take further action
on shrinking its retail footprint, and Mr. de Nysschen's plan was
designed to reshuffle the way those dealers operate on a voluntary
basis.
Dealers, however, say the plan isn't voluntary. "[I]n a world
where every Cadillac dealer competes with every other Cadillac
dealer on the internet, there is nothing voluntary about the
program," the letter, sent Aug. 3, says. Dealer associations from
seven states including New Jersey, Wisconsin and Connecticut
cosigned the letter, and it was first reported by Automotive
News.
The letter argues that there will be a roughly 8% difference in
the effective cost of vehicles between top-tier dealers and those
that don't participate, which translates into thousands of dollars
per vehicle. They say 60% of dealers saw an immediate and
pronounced drop in the value of their franchises after Project
Pinnacle was announced, and said those stores are in danger of
being closed.
A Cadillac spokesman said the company is working on a response
to letters it received.
Cadillac sold 87,572 vehicles in the U.S. through July, down 8%
from the same period a year ago and equating to under 1% market
share. That is less than half the volume sold by Daimler AG's
Mercedes-Benz, BMW and Lexus during the same period.
Write to Gautham Nagesh at gautham.nagesh@wsj.com
(END) Dow Jones Newswires
August 08, 2016 18:31 ET (22:31 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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