Cadillac News: 'Too Many Dealers' Claims Cadillac's President, Has Idea To Possibly Fix It

[William Maley]

Cadillac President Johan de Nysschen has a problem with the brand's dealers, specifically how many there are. According to data gathered by Autodata Corp and The Detroit News, Cadillac currently has 928 dealers in the U.S. A large number when compared to competitors in the luxury class such as Audi (281 dealers) and Mercedes-Benz (364). Factor in total sales for year and Cadillac finishes last with each dealer selling an average of 184 vehicles (170,750 vehicles sold for the year). This pales in comparison with the likes of Audi (648 vehicles sold last year per dealer) and Mercedes-Benz (978 vehicles sold last year per dealer).

"With our very large dealer network … we so fragment the available volume, that many of our stores are unable to reach critical mass in terms of volume and their profitability to afford the investment in the kind of ... facilities that is the custom and practice for the sector," said de Nysschen.

So what does de Nysschen plan to do about this? Well he isn't saying anything about cutting dealers at the moment. Instead, he is proposing smaller 'boutique' stores which will be separate facilities to have between 2 to 5 vehicles along with a virtual showroom with TV screens and 3-D images. The hope is that this will reduce a phenomenon de Nysschen calls "selling Cadillac out the back door of the Chevrolet store."

"We want to create a concept that's built around the notion of a small boutique shop. The idea is you don't have to be a large, Taj Mahal mausoleum brand store to be classy and sophisticated and premium. You can do a small two-car showroom with an investment amount that is kind of appropriate to the size of the sales opportunity in their local market, and we harness technology to supplement then what we can offer," said de Nysschen.

de Nysschen will be presenting this plan to dealers at the 2015 National Automobile Dealers Association conference in San Francisco this weekend.

IHS Automotive analyst Tom Libby tells The Detroit News that de Nysschen's plan makes some sense as it allows Cadillac to build and grow a brand by separation.

"It makes sense. It's a challenge to convince the retailer to invest a lot of money. It sounds like a compromise," Libby said of the idea.

Source: The Detroit News

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[G. David Felt]

One I do agree that there are too many dealers. I think Cadillac needs to be stand alone, not part of a huge mega all in one store that sells Chevy, Buick, GMC, and Cadillac.

 

With that said, I do not see a reduction without GM buying out and closing down dealers.

 

Perfect example of this is up north there is a Mega Chevy, Buick, GMC and Cadillac Dealer. One Big building and for the most part they sell 3 product lines really well and have space on the shared floorroom so you have an Escalade next to a suburban or the New ATS next to a LaCross, etc. This sucks, the building is very dated and they have not invested in updating the dealership in probably 20 years.

 

These kinds of dealership need to either invest and separate as stand alone floors or loose a product line. Since this particular dealer does so well with Chevy, Buick and GMC. I say pull the Cadillac line.

 

My stand alone Cadillac dealer I go to is great with service but I wish they would update the 60 year old building. I know some people especially the baby boomers remember when this was a Pontiac, Buick & Cadillac dealership with their large glass showroom floor but now, it is just dated. Yes history is cool, but I am ready for a 21st Century Dealership that is modern.

[balthazar]

The boutique concept is a good one, but there will be teething problems.

First off, none of the competitors mentioned above has tiny stores, and while the "experience" can be on par or even much better than those, a "2-car" showroom is not going to be what any other mainstream lux brand does and the consumer is possibly going to associate that with the opposite of a growing brand. Also need to address service.

 

Unquestionably, there will be further lessening of the dealer count. They have an uphill business case scenario… which is why they are so commonly paired with other Divisions/ brands.

 

The most impressive 'dealer' environment I was ever in (and it wasn't a dealership) was seeing Cadillacs parked on tapestry rugs in the the old GM building guilded first-floor halls. 

[G. David Felt]

I agree that a small store will not work, All the luxury dealers around here have huge stores. Lexus just opened up a 3 story Dealership with auto's on the top two floors and service on the bottom floor. Very luxury and nice compared to Cadillac. MB, Audi, BMW, Porche, Bently and the rest of the high end auto's all have big luxury dealerships in Bellevue here also. Cadillac was moved out of the Chevy Dealer but still owned by that dealer into their defunct Hummer building. So you have Cadillac next door to Chevy in a Hummer Building.

 

Just all kinds of wrong!

[Drew Dowdell]

This is how he plans to raise prices without changing total volume much.

Instead of having so many dealers competing with each other by offering discounts, he wants fewer dealers with less motive to discount.

 

By running more cars per dealer, the dealers can have higher margin without raising MSRP much, and Cadillac can lower incentives.   It's a good idea all around and probably a decade past-due.

 

As for the other premium makes, they often pair with their pedestrian brands.  In Pittsburgh, off the top of my head we have:

 

Chevrolet-VW-Audi, and the Chevy Store heavily advertises as a commercial truck superstore. Nothing like pulling your A8L TDI in for service next to a Mr. Plumber "We'll unclog your john in 15 minutes or less" Chevy Express Duramax. 

 

Lexus-Toyota-VW 

 

Mercedes-Freightliner-SMART

 

Audi-VW-Honda

 

One thing I wish Cadillac would do would be to enforce a naming convention.  Very few of the other premium brands are referred to by their owners names.... Most are Lexus of (City name) or Audi of (Region name).  The are some exceptions for very big older premium dealers, but most are like this.   Saturn did this, so I'm assuming it is something written into the franchise contracts.

[balthazar]

^ Of course, Cadillac already greatly reduced it's dealer count. I thought they were around 1300-1500 before the BK, now at 928. I still think a further reduction is warranted.

Also like the naming convention change Drew suggests… tho I've seen plenty of foreign lux brands under 'people' names, too. Ray Catena MegaStore mercedes/junkuar/porsche/etc/etc/etc is the one I'm thinking of right off the bat.

 

Took notice of the Porsche dealer not far south of me the other day (and in the greater Princeton area). They're in an un-altered ex-Denny's building on U.S. Rt 1. Horrible.

[Drew Dowdell]

^ Of course, Cadillac already greatly reduced it's dealer count. I thought they were around 1300-1500 before the BK, now at 928. I still think a further reduction is warranted.

Also like the naming convention change Drew suggests… tho I've seen plenty of foreign lux brands under 'people' names, too. Ray Catena MegaStore mercedes/junkuar/porsche/etc/etc/etc is the one I'm thinking of right off the bat.

 

Took notice of the Porsche dealer not far south of me the other day (and in the greater Princeton area). They're in an un-altered ex-Denny's building on U.S. Rt 1. Horrible.

 

 

Yeah, the Ray Catena in NJ and Rohrich Lexus/Cadillac... few others and Bobby Rahal Lex, MB, Jag are a few that I can think of as well.   But they've all been in the business of selling those cars for many years. They probably got in before the contract terms changed to have the newer naming convention. 

 

Our local BMW dealer is known interchangeably as P&W BMW and Shadyside BMW, so I wonder if they are phasing the P&W name out.  Bobby Rahal came and built a new Benz dealer right on P&W's doorstep a few years ago (this is a fairly urban area) but they are "Mercedes of Pittsburgh" since they're the only Benz dealer inside of city limits.

[balthazar]

Now I see where that convention came from. With dealer counts very low, invariably the first foreign store in an area was usually tempted to name themselves after the local, and in doing so it becomes 2-pronged; it advertises the name & the location. The GM Divisions were not commonly in that scenario, at least since WWII.

[Drew Dowdell]

Now I see where that convention came from. With dealer counts very low, invariably the first foreign store in an area was usually tempted to name themselves after the local, and in doing so it becomes 2-pronged; it advertises the name & the location. The GM Divisions were not commonly in that scenario, at least since WWII.

 

Pretty sound hypothesis. I'm betting that the OEMs later wanted to put a stop to that hence the new convention.  I think all of the Saturn dealers for example were Saturn of Bordentown, Saturn of Monreoville, etc.

[ponchoman49]

Cutting some dealerships might be a good idea. But his re-naming convention is plain silly and not needed. You don't see Lexus or BMW re-naming there entire lineup. Imagine what would happen if an Accord turned into a H-SLA or a Camry was called an Avensis here in the States. I bet customers would become confused and sales would drop off. This is the last thing Cadillac needs- less sales! And I fully believe that further price adjustments are in order for the rest of the Cadillac lineup starting with the radically overpriced Escalade. I also agree that Cadillac needs to further distance itself from GM with there stupid bean counter mentality and be given more free rein in designing there own engines/transmissions and chassis without interference. There quality control could use improvement too!

[G. David Felt]

I would love all Cadillac stores to follow that naming convention.

 

Cadillac of Shoreline rather than Dougs Northwest Cadillac of Shoreline

 

Cadillac of Bellevue rather than Chevrolet Cadillac of Bellevue

 

Cadillac of Renton rather than Brotherton Cadillac Buick GMC

 

Cadillac of Fife rather than Look Larson Cadillac Buick Chevrolet GMC Audi BMW VW Mercedes Benz Porsche "Family owned mega auto place in Fife, they have all the brands there, the local commercials are crazy as one big commercial for every brand of car out there.

 

We'll I like the Idea of simplifing it to follow what I see here with other brands having the car brand name and the city it is in.

[Drew Dowdell]

Took notice of the Porsche dealer not far south of me the other day (and in the greater Princeton area). They're in an un-altered ex-Denny's building on U.S. Rt 1. Horrible.

 

I drove by there tonight.  The actual dealership is in the former Princeton Lexus building behind the Denny's.  They're just using the Denny's parking lot for excess inventory.  It does look pretty bad though, they should just level the building as it blocks the view of the Porsche building.

[regfootball]

15 cars per month won't operate a standalone. So if they reduce dealers and let say they move 50 a month, fine but it doesn't matter what you do on the sales and marketing side the customer doesn't like the price or equate the value to what you are trying to get you lose anyways. Standalones may be at a disadvantage to other GM multi brand dealers in a service aspect. Your smaller service dept may have a lot more costs keeping equipment and running that side of the business as far as scale.

[Drew Dowdell]

15 cars per month won't operate a standalone. So if they reduce dealers and let say they move 50 a month, fine but it doesn't matter what you do on the sales and marketing side the customer doesn't like the price or equate the value to what you are trying to get you lose anyways. Standalones may be at a disadvantage to other GM multi brand dealers in a service aspect. Your smaller service dept may have a lot more costs keeping equipment and running that side of the business as far as scale.

 

Great points, but I'm betting that it would be standalone in architecture only.  The nicest Cadillac dealer in my area is technically a "standalone" on a campus of car dealerships.  They're all owned by the same group, but they look like separate dealers. For service, you drive your Cadillac into a garage (the door opens automatically as you pull up and closes after you pull in).  Then you walk in to talk to the service advisor. Then while you're in the Cadillac lounge, a service tech comes and shuttles your car to the main campus garage. When your car is done, it's brought back to the same garage for pickup.

 

Doing it this way satisfies both ends of the equation. Keeps the Cadillac customers from having to interact with the commoners and yet allows for the economies of scale of a dealership with all brands.

 

This dealership campus consists of Cadillac, Buick, GMC (used to also have Pontiac, Saab, Hummer, Suzuki, and Saturn). Subaru, Hyundai, and Fiat.

Pontiac simply vacated the Buick GMC building.  Saab vacated the Saab/Cadillac building and Cadillac took the whole thing over. Subaru took over the Hummer building (looks quite appropriate too).  Hyundai moved into the Saturn building, and Fiat took Hyundai's old spot.

[hyperv6]

Plain and simple GM in general has way to many dealers yet.

The problem is they are not easy to loose unless you spend billions to buy them out and that is not going to happen. This comes back to the Tesla sell direct debate where someone like GM can not spend the money to kill the dealers they need as they need the money for product.

 

But as long as you have too many dealers you will continue to have prices that fall as dealers locally compete. They are hurting each other. If you had to drive 100 miles to the next dealer then they have a better chance of holding the line on price.

 

As for names they have to have names and while many have tried the regional thing when you have 4 dealers in a metro area three others have to chose a name. Some do it better than others. For years we had one here that was owned by George Delorean. [brother of John] and it was Cadillac by Delorean for years.

 

To fix the issue you need one dealer per so large a metro market. It needs to be a modern dealer with a high quality tech look. I think this plan here may be more to help squeeze some weaker dealers out. Call it strong arm but GM has some ways to apply pressure but it is a fine line to walk or they end up in court.

 

I have seen it here with a local Chevy dealer they want gone and a GMC dealer they would like to see take over. They have forced the Chevy dealer at ever end as they are not a well run dealer and the GMC only dealer is getting all sorts of help but they are a very well run dealer. Hell how many Pontiac GMC dealers just went GMC and are making a good living should tell you how good they are.

 

But even Audi and Mercedes here have come in and made all the dealers build new dealers and they are all up to date and not crowding each other.

 

It is a pain many are farther away from owners but that is the price you pay to own an exclusive car too.

 

I see a plan here to remove Cadillac as much as they can from just being a GM division and being a motor company that is just owned by GM. They want the company to be seen as their own deal and a new dealer plan is just the start of it as well as the move to NYC.

[daves87rs]

Few could be cut, would not hurt...

 

 

While I like the idea, it is not going to work for every market. Caddy/ GM need to look at EACH area (like a good retailer) and taylor the needs as such. I think though this concept will work well for the most part, especially in more "well do to" areas. In this price range, people tend to treat this kind of sale like buying the next pair of shoes or purse.....