Cadillac Offers Buyouts To Their Smallest Dealers

I think this is actually a highly intelligent move.

It is a bright idea.  Dealer franchise laws do need to go.  Cadillac can survive if not thrive on about 500 dealers.  The little guys need to disappear.

This is a long over do move. 

If you want a stronger dealer network you must make them stronger. 

GM has too many dealers period and Cadillac was one that was the most effected.  To make them stronger you must weed out the weak and under performing dealers. In many cases selling Cadillac's was apart time job as they were also selling Chevy and Buicks. 

The dealers here all sold less than 50 cars a year. In many cases some were selling one to two a month. 

Cutting the number of dealers will move more sales to the stronger dealers and make it easier for more stand alone dealers going forward and for them to be able to better take care of the customers. 

Most metro areas only need one dealer and an area like LA could use a couple but there are many places there is just no need for a dealer. Also if customers are remote and not close to a dealer GM can fall back on the other dealers to fix cars if needed. In a pinch they can help arrange a customer repair at a dealer that is local if the customer is ok with this. 

This is not unlike the Chevy dealers now taking care of the Hummer Customers now. 

As a simple engineer far removed from sales, can someone please help me to understand how eliminating dealers will increase sales?  This does not sound like a smart plan.  How does GM suffer if some dealers sell far less than others?

This is a great plan as we need to dump the little dealers who do not have the cash to invest in a luxury dealership, does not have the sales to support a luxury style of dealership and does not offer the service one would expect of a luxury dealership.

In a span of 18 miles, I have the one big dealership that I go to as the service is far superior and two small ones that usually only carry a couple cars, an escalade, etc. These two small dealerships are also part of a mega Cadillac, Buick, GMC, Chevy, Pontiac, Oldsmobile and Saturn mega store concept from the 80-90's that are very dated and clearly not a place that Luxury buyers would go to.

This is about giving the buyer the buying experience they expect. We have a MB dealership on the north end, one on the eastside, one in the south end. Total of 3 MB dealerships, same with BMW and they service the greater Seattle Tacoma area. 3 Counties and are very successful. Cadillac on the other hand has 12 dealerships servicing this same area. Most look like dated tear downs from the 70-80's and clearly we only need 3-4 at most.

This is about changing to insure that the buying experience is what one would expect of a luxury dealership. Not trying to be all things to everyone out of one lot. GM does not need that unlike MB or BMW.

Hmmm.  I wonder how many Cadillac owners would be happy that their local dealership that is only 5 miles away, will close because the owner can't meet the renovation timeline demanded by GM.....and they then have to drive 100 miles to find the next nearest dealership.

I know I would be pissed, and I could care less that my dealership did not decorate in time.

12 hours ago, Wings4Life said:

As a simple engineer far removed from sales, can someone please help me to understand how eliminating dealers will increase sales?  This does not sound like a smart plan.  How does GM suffer if some dealers sell far less than others?

It is simple. 

You can have  bunch of dealers that sell a few cars and make for a weak network system of dealers competing for a fewer number of cars. 

Or you can have a fewer number of dealers selling more cars and making more money being able to better serve customers with better facilities and better staff as they will be more profitable to provide this. 

The 400 dealers here sell much less than 50 cars a year and only account for 9% of sales. The for the most part are not making money and can not provide the service standards Cadillac would like to see their dealers supply. Also the small number of sales would go to the stronger dealers and provide more income to the strong dealers that can serve the customers better. 

It is more not so much about decoration as it is level of service and the ability to afford it.

The weak dealers selling 1-2 cars a month are a parasite that hurt the entire network vs. helping it. 

Ford and GM both have way too many dealers than they need. Years ago you could get away with multiple dealers on every corner but no longer. There are strenght and  profits in larger dealers with volume and less competition between dealers on transaction price. 

Even at Chevy vs Toyota the Chevy stores per small metro area can number 5-10 and Toyota 1-3. 

Ford in out area has helped cut the number of dealers with buy outs from Super Stores that own dealers in many cities. Some stores closed and others were enlarged but are part of a network that is working under one owner. This has helped their stores be more profitable. 

While some may not be happy driving farther it has not hurt the Mercedes, BMW and Audi dealers in out area. The numbers even low have declined here too. There is now only a couple in the Cleveland. Akron, Canton area. They are all large new dealers with top level service vs. the past where they were just tagged in with another brand and only selling 1-2 cars a month as a part time dealer for all intents. 

GM would like to kill off about 1/3-/1/2 of the Chevy dealers too but the cost would be too great to buy them out. 

This is not much different than the killing of Pontiac and Olds. GM also had too many divisions for the number of cars they sold. With cost going up it was more and more difficult to make so many models and market them at the lower numbers and show a profit. 

Ideally today one volume brand and one Luxury division is appropriate. In the Case of GM Buick is a non factor since China keeps them alive. The key for them is to use them for the low end Luxury and not let Cadillac worry about that. It is a case where a liability can be turned into an advantage as BMW and Benz try to work for more numbers with lower end cars in North America. 

I woudl agree with hyper, but our dealership experiences are now very different. Kind of interesting in a way.

When i was a kid we took our Ford Country Squire wagons to a small town Ford dealer, town was no bigger than 500 people and the sales and service departments shared the same counter.  The owners two hunting dogs usually slept in front of that counter.  You would be hard pressed to find 30 cars on the lot, new or used.

Took my MINI Cooper S in for a recall on the power steering pump, went to Midwest Auto Group here in Columbus for the work and an Oil change. they are one of the largest European car dealers in the world, and have perhaps several thousand cars on hand. Pulled in next to a black on black 2017 Rolls Royce in the service bay, after pulling past several Ferrari's, Lotuses, Jags, Volvos and the like.

Very, very different dealership experience!

Thankfully, both dealerships offered free coffee...

...and GM's weak link is their dealer network.  Dealer network is also holding back VW and to a lesser extent FCA and a few others.

Will be interesting to see how this all plays out.

14 hours ago, Wings4Life said:

As a simple engineer far removed from sales, can someone please help me to understand how eliminating dealers will increase sales?  This does not sound like a smart plan.  How does GM suffer if some dealers sell far less than others?

I don't think it will increase sales but there is no way a dealer selling less than 1 car a week is making enough on it's own to profit so I'm assuming they're getting money from the mother ship therefore is they decrease their sales slightly by closing doors they will increase their margins and profits with lower total sales. That's just my guess.

To anyone questioning this move as non-effective or illogical.. in terms of gaining more sales..The level of customer experience from one portion of a divisional dealership.. Chevy/Cadillac does not translate into a positive one in relation to proper customer relations. As much as I love GM.. my Chevy dealership experience is no way no how as rich as my experience at the Cadillac dealership I deal with. The dealership is a Cadillac-Only store.. and based on customer treatment.. it benefits greatly from not being associated with the Chevy store.

It pretty much boils down to U will not get Ritz Carlton treatment at the Hilton. That carries over in sales.. PERCEPTION of luxury has to start out where U buy and with the people U deal with along the way of purchase. A person used to selling, trained to sell a Chevy Sonic or Silverado pick-up should have nothing to do with a sales of a $95K CT6. Let me make it even crazier in clarity.. A PERSON SELLING A TAHOE DOES NOT HAVE THE TRAINING TO HANDLE A SALE TO SALE OF AN ESCALADE. And yes the Tahoe can hit $70K.. but the mentality of that buyer simply is different. It is the reason why a Chevy buyer will spend $70K on the LOADED Tahoe but not feel up to spending $70K on the base Escalade.. and vise-versa. Luxury is a state of mind.. and JDN seems to have a handle on it. There is a direct correlation as to why Cadillac ATPs are up, and leading the segment... and it is not only because Cadillac sells Escalades. The CTS, XTS, ATS, and XT5 are moving, some slower than others, without massive incentives being lobed at the customers.

Thanks hyper, pretty much what I expected in terms of their thinking.  I am just not sure it will matter much, while absolutely inconveniencing some current and future customers who have to then seek out and drive to further to a dealer.  And the justification to those customers, is that their long time dealer did not live up to standards set.  Hmmm.  I doubt one customer will ever think or say, ‘yeah, get rid of them.  I will drive elsewhere.’  But I digress.

Oh, and I completely disagree about your similarity analogy to GM killing off redundant brands, which has a direct and hard impact on profit, complexity, product planning, etc.  At least from the corporations POV.  The customer just sees another loss.  Or perhaps that’s what you meant.

Cadillac currently has 3x as many dealers as Benz, for instance, yet sells about a 1/3 as many cars. There is also a measure of desirability viewed from simple things as foot traffic in and out of dealership. Having less dealerships also means U can have the best personal condensed into one dealer as opposed to spread all over the place

6 hours ago, A Horse With No Name said:

I woudl agree with hyper, but our dealership experiences are now very different. Kind of interesting in a way.

When i was a kid we took our Ford Country Squire wagons to a small town Ford dealer, town was no bigger than 500 people and the sales and service departments shared the same counter.  The owners two hunting dogs usually slept in front of that counter.  You would be hard pressed to find 30 cars on the lot, new or used.

Took my MINI Cooper S in for a recall on the power steering pump, went to Midwest Auto Group here in Columbus for the work and an Oil change. they are one of the largest European car dealers in the world, and have perhaps several thousand cars on hand. Pulled in next to a black on black 2017 Rolls Royce in the service bay, after pulling past several Ferrari's, Lotuses, Jags, Volvos and the like.

Very, very different dealership experience!

Thankfully, both dealerships offered free coffee...

...and GM's weak link is their dealer network.  Dealer network is also holding back VW and to a lesser extent FCA and a few others.

Will be interesting to see how this all plays out.

See I like the small town service where you can wonder back to the back of the shop and really talk to the guy working on your car. Few dealers will let you wonder anymore.

Today many customers are all about get me in and get me out while giving me a Danish and few WiFI.

4 hours ago, Wings4Life said:

Thanks hyper, pretty much what I expected in terms of their thinking.  I am just not sure it will matter much, while absolutely inconveniencing some current and future customers who have to then seek out and drive to further to a dealer.  And the justification to those customers, is that their long time dealer did not live up to standards set.  Hmmm.  I doubt one customer will ever think or say, ‘yeah, get rid of them.  I will drive elsewhere.’  But I digress.

 

 

 

Oh, and I completely disagree about your similarity analogy to GM killing off redundant brands, which has a direct and hard impact on profit, complexity, product planning, etc.  At least from the corporations POV.  The customer just sees another loss.  Or perhaps that’s what you meant.

 

The fact is times have changed, cost are higher than ever and the way of doing business has to change or you will be out of business. We have yet to see the last automaker fail and we will see more. Development cost are so high we are seeing things like Ford and Chevy working together on transmissions not because they want to but because they have to.

Companies just can't offer 14 variations of the same kind of car any longer as it is too expensive unless it is sold globally. Volume of each model needs to be high today as it is difficult to survive moving forward selling only a small volume at a low cost.

Generally customers and even people here on the web sight do not understand the cost of doing business today in making autos. They may see a loss of a division but a Corporations see it as a way to make more money and cut cost.

Profits have to be up to pay the bills and to develop new and competitive product. If not you die.

I am still a die hard Pontiac fan but I fully understand why from a business standpoint why they were killed. knowing how the new global market works Pontiac fell too far behind not going global and holding volumes much too small.

The inability of GM to understand how to Run Pontiac caught up to them. In the end they got Pontiac to a point in 2003 with no real RWD performance option for the GM performance division. Yet we had the Aztek? 

Globally Pontiac was a mystery to most and really had no global market outside the Holden based cars that came way too late to help.

As to back to the topic. Driving farther is not going to be an issues as most customers will have to drive as far to find a Audi or Benz dealer as it is.

My buddy had to drive over an hour to a Porsche dealer and that was not an issue to him as it was a good dealer {Penske} and he was willing to do it because he wanted a Porsche.

We had a local one but the market was so small it was removed and placed in Cleveland with the existing dealer as even Porsche cut the number of dealers. This is not just a GM thing. Our Benz dealers also merged or sold out too.

17 hours ago, Wings4Life said:

Hmmm.  I wonder how many Cadillac owners would be happy that their local dealership that is only 5 miles away, will close because the owner can't meet the renovation timeline demanded by GM.....and they then have to drive 100 miles to find the next nearest dealership.

 

I know I would be pissed, and I could care less that my dealership did not decorate in time.

Cadillac is not FORD, Chevy or DODGE, they are a Luxury brand that should have world class service and dealerships. Simple, you cannot sell enough to justify the luxury line, then you do not have it.

Many Ford Dealerships have Lincoln and they do Lincoln a dishonor by having them in the same show room.

Luxury is Luxury and deserves to have it's own place.

Fact of life is that while many rich people will go to Walmart to save money, They still do not want their luxury products on the same shelf there.

Same with Cars, People who buy fords and Chevy's for the most part stay with those dealerships and rarely move up to the luxury line if it is shown there. Luxury buyers expect a much higher level of service and dealership.

Ford would be wise to make this change if they want Lincoln to Compete with Cadillac, MB, BMW etc. Otherwise accept that Lincoln is a Buick competitor.

Just how I see it and I think many others do also.

5 hours ago, Wings4Life said:

Thanks hyper, pretty much what I expected in terms of their thinking.  I am just not sure it will matter much, while absolutely inconveniencing some current and future customers who have to then seek out and drive to further to a dealer.  And the justification to those customers, is that their long time dealer did not live up to standards set.  Hmmm.  I doubt one customer will ever think or say, ‘yeah, get rid of them.  I will drive elsewhere.’  But I digress.

Wings, I am one of those customers that with 3 cadillac dealerships in my general area, 15 mile circle, the two closest to me are terrible and deserve to be closed down. I now drive to the farthest dealer who has outstanding service, attention to detail, etc. In fact I take my Trailblazer SS there to get the synthetic oil changed as the service is that much better and the price of the oil change between Cadillac and Chevy is nothing since it is synthetic. 

I am a customer who does drive a little farther for better service yet same price.

40 minutes ago, hyperv6 said:

See I like the small town service where you can wonder back to the back of the shop and really talk to the guy working on your car. Few dealers will let you wonder anymore.

Today many customers are all about get me in and get me out while giving me a Danish and few WiFI.

Agree completely.  Part of my Mustang fetish comes from this dealer in 1971...We got a new Country Squire wagon that was blue....there was a blue Mach one in the service bay next to our wagon when we picked up our nice new wagon.

7 minutes ago, dfelt said:

Wings, I am one of those customers that with 3 cadillac dealerships in my general area, 15 mile circle, the two closest to me are terrible and deserve to be closed down. I now drive to the farthest dealer who has outstanding service, attention to detail, etc. In fact I take my Trailblazer SS there to get the synthetic oil changed as the service is that much better and the price of the oil change between Cadillac and Chevy is nothing since it is synthetic. 

I am a customer who does drive a little farther for better service yet same price.

I am the same way.  I have a regular independent mechanic who works on my cars and he is a bit of a hike but worth it.  And for dealership service, i sue a dealership on the far side of town, as their service is excellent.

The dealer nearest me is god awful.  My former boss Eric had to show them how to use their alignment machine to get a proper alignment on his teenage daughters car. They were literally clueless on how to operate their own equipment.

15 minutes ago, dfelt said:

Cadillac is not FORD, Chevy or DODGE, they are a Luxury brand that should have world class service and dealerships. Simple, you cannot sell enough to justify the luxury line, then you do not have it.

Many Ford Dealerships have Lincoln and they do Lincoln a dishonor by having them in the same show room.

Luxury is Luxury and deserves to have it's own place.

Fact of life is that while many rich people will go to Walmart to save money, They still do not want their luxury products on the same shelf there.

Same with Cars, People who buy fords and Chevy's for the most part stay with those dealerships and rarely move up to the luxury line if it is shown there. Luxury buyers expect a much higher level of service and dealership.

Ford would be wise to make this change if they want Lincoln to Compete with Cadillac, MB, BMW etc. Otherwise accept that Lincoln is a Buick competitor.

Just how I see it and I think many others do also.

One reason that I am thinking of buying a used Luxury car with my next automotive purchase.  The bar really is set much higher.

2 hours ago, dfelt said:

Wings, I am one of those customers that with 3 cadillac dealerships in my general area, 15 mile circle, the two closest to me are terrible and deserve to be closed down. I now drive to the farthest dealer who has outstanding service, attention to detail, etc. In fact I take my Trailblazer SS there to get the synthetic oil changed as the service is that much better and the price of the oil change between Cadillac and Chevy is nothing since it is synthetic. 

I am a customer who does drive a little farther for better service yet same price.

 

You are lucky to have the dealers close. I was referring to those in rural areas perhaps, that don't.  

Makes sense to do this, if a dealer is selling 3-4 cars per month, that isn't a viable dealership.    Better to buy those out and make the remaining dealerships nicer.

As far as travel goes, once you buy the car you don't really need to take it to the dealer for service.  Aside from the independent shops, and Midas and Mienke and Monro type places there are a lot of service options.  Plus you could take your Cadillac to any GM dealer to fix since the 2.0T, 3.6 V6 and 6.2 V8 are GM corporate engines, nothing in there that a Chevy mechanic couldn't fix.

Cadillac will come to you to get your auto, take it, service it, wash it, vacuum it and return it in clean condition to your home or work.

town where my mom lives, 50k pop in a rural midwest area......huge GM dealer that's been a regional pillar for decades.  They have all the GM brands.  I bet they don't sell a ton of Caddies, and it is one of the nook in a corner stores.  Closest other GM dealers at least an hour away i think.

No Lexus or Infiniti or Audi for an hour away.  Conservative buyers there like their GM's and even if they don't buy in big number the Cadillacs, they are still aspirational there.  Lots of SRX's sold.  Maybe they sell (purely a guess) 50-100 caddies a year.  But their same buyers buy lots of pickups and have money and when they want a car they may want a cadillac too.

Cadillac should be analytical on which of those smaller dealers they try to cut out.  Part of GM's success over history is because they are in these smaller town midwest pockets no other dealers are.

7 minutes ago, regfootball said:

town where my mom lives, 50k pop in a rural midwest area......huge GM dealer that's been a regional pillar for decades.  They have all the GM brands.  I bet they don't sell a ton of Caddies, and it is one of the nook in a corner stores.  Closest other GM dealers at least an hour away i think.

No Lexus or Infiniti or Audi for an hour away.  Conservative buyers there like their GM's and even if they don't buy in big number the Cadillacs, they are still aspirational there.  Lots of SRX's sold.  Maybe they sell (purely a guess) 50-100 caddies a year.  But their same buyers buy lots of pickups and have money and when they want a car they may want a cadillac too.

Cadillac should be analytical on which of those smaller dealers they try to cut out.  Part of GM's success over history is because they are in these smaller town midwest pockets no other dealers are.

This makes sense and I would have to think they would have some common sense about this type of dealer. The focus needs to be on areas like where I live where you have two small towns with a single store approach like that and the service sucks, sales have to be insignificant and you can drive an extra 15 min to a much bigger dealer with much better service. No need for a dealer between Seattle and Tacoma or Seattle and Everett here that cannot offer a true luxury experience.

They need to focus on these small dealers that just do not make sense any longer.

On 9/27/2016 at 4:21 AM, hyperv6 said:

It is simple. 

 

You can have  bunch of dealers that sell a few cars and make for a weak network system of dealers competing for a fewer number of cars. 

Or you can have a fewer number of dealers selling more cars and making more money being able to better serve customers with better facilities and better staff as they will be more profitable to provide this. 

 

The 400 dealers here sell much less than 50 cars a year and only account for 9% of sales. The for the most part are not making money and can not provide the service standards Cadillac would like to see their dealers supply. Also the small number of sales would go to the stronger dealers and provide more income to the strong dealers that can serve the customers better. 

It is more not so much about decoration as it is level of service and the ability to afford it.

The weak dealers selling 1-2 cars a month are a parasite that hurt the entire network vs. helping it. 

Ford and GM both have way too many dealers than they need. Years ago you could get away with multiple dealers on every corner but no longer. There are strenght and  profits in larger dealers with volume and less competition between dealers on transaction price. 

Even at Chevy vs Toyota the Chevy stores per small metro area can number 5-10 and Toyota 1-3. 

Ford in out area has helped cut the number of dealers with buy outs from Super Stores that own dealers in many cities. Some stores closed and others were enlarged but are part of a network that is working under one owner. This has helped their stores be more profitable. 

While some may not be happy driving farther it has not hurt the Mercedes, BMW and Audi dealers in out area. The numbers even low have declined here too. There is now only a couple in the Cleveland. Akron, Canton area. They are all large new dealers with top level service vs. the past where they were just tagged in with another brand and only selling 1-2 cars a month as a part time dealer for all intents. 

GM would like to kill off about 1/3-/1/2 of the Chevy dealers too but the cost would be too great to buy them out. 

This is not much different than the killing of Pontiac and Olds. GM also had too many divisions for the number of cars they sold. With cost going up it was more and more difficult to make so many models and market them at the lower numbers and show a profit. 

 

Ideally today one volume brand and one Luxury division is appropriate. In the Case of GM Buick is a non factor since China keeps them alive. The key for them is to use them for the low end Luxury and not let Cadillac worry about that. It is a case where a liability can be turned into an advantage as BMW and Benz try to work for more numbers with lower end cars in North America. 

 

This because its sales 101. This is a long overdue move by GM. If the small dealers can't keep up with the changes then it is better to just buy them off and put those resources into the larger dealerships. 

There's a reason Mercedes doesn't have a dealership in the middle of Cornfield, Ohio and they make you go into Columbus to get your S-Class serviced.

Note too where there is a German dealer there will be a Cadillac close by. No one will have to drive farther due to less dealers. 

If your customers only buy from you for convenience they are not spending enough. 

Here are the types of customers that will be affected. 

2 hours ago, hyperv6 said:

Note too where there is a German dealer there will be a Cadillac close by. No one will have to drive farther due to less dealers. 

If your customers only buy from you for convenience they are not spending enough. 

 

Here are the types of customers that will be affected. 

 

 

 

Those are the kinds of customers Cadillac does not need or any luxury car maker wants.

3 hours ago, dfelt said:

Those are the kinds of customers Cadillac does not need or any luxury car maker wants.

Jerry take the pen!   

That is my point and as funny as the clips are they are closer to the truth than we would like to see. 

The customers that the dealer closing will hamper are just like these who buy the retirement Caddy and die. 

Also the old adage also applies here too. You can sell a old man a young mans car but you can not sell an young man an old mans car. The is always the odd ball but generally that is how the market works today. 

I get the feeling the this whole "tiers" thing will hit other dealerships as well.....just the caddy dealerships see it first.

I also see GM giving preference to the "mega" corp owned stores over the smaller ones in the area. For control along with some other things...

And if car sharing is the future, it's better to have warehouses than dealerships.....

On 10/6/2016 at 0:12 AM, daves87rs said:

I get the feeling the this whole "tiers" thing will hit other dealerships as well.....just the caddy dealerships see it first.

I also see GM giving preference to the "mega" corp owned stores over the smaller ones in the area. For control along with some other things...

 

And if car sharing is the future, it's better to have warehouses than dealerships.....

For sure with Chevy at some point. GM has Chevy dealers that need to be cut in the worst way. They are small and underfunded. They have their good point but bad also. 

Many of the smaller dealers are getting bought out by larger networks just as some Ford dealers have. 

The MFG are always going to support the stronger larger owners as they provide to be the best partners in the long run no matter the brand. 

That is why MFG like the Penske, Hendricks, Spitzer, etc dealers that go nation wide. 

Large dealers like this take on the task of distribution and save the MFG a lot of money. Many import dealers have operated like this for decades. You want a red car they go into their inventory and get you one with the right options as you could not order most of their models from Japan. 

Would agree there...