Cadillac Planning Drastic Cuts To Dealer Network – Here’s Why
Cadillac is struggling with multiple issues this year. Sales are down overall, and the mix of products that Cadillac sells are trending heavily towards just one model. Although many associate Cadillac with its 200 MPH CTS-V super sedans and its mega-luxury Escalade sport utility vehicle, the truth is the company does not sell very many. Almost a third of Cadillac’s sales are now from just the XT5 midsize crossover that recently replaced the SRX model. More bad news. The XT5 is not selling as well as the model it replaced. With sales down, Cadillac is looking to make big changes, starting with its dealer network.
Cadillac is on pace to sell roughly 155,000 vehicles in the U.S this year, down about 7% from its sales last year. That is roughly half of the number of vehicles rival Lexus will sell this year. To move those 155K vehicles, Cadillac has an amazingly-high number of dealers, 925 to be exact. Lexus has just 236 dealers to move double that number of vehicles.
To put it into better perspective, Cadillac has about 400 dealers who only sell about one vehicle per week. For three-quarters of these dealers, Cadillac only represents ten percent of the vehicles they sell (many have other GM brands on the same lot). Lexus dealers average 30 per week and primarily sell only new and pre-owned Lexus vehicles on their lot.
Cadillac's plan is to eliminate 400 of its lowest-performing dealerships. The plan is named Project Pinnacle. To overcome objections by the dealers, Cadillac is offering buyouts in the neighborhood of $120,000. “Our target is zero defectors,” Cadillac President Johan de Nysschen told Automotive News. He added, "Our target is to have 100 percent of the Cadillac dealers engaged with the Cadillac business.”
This isn’t Cadillac’s only dealer plan to have been launched in recent years. About four years ago, Cadillac tried to keep pace with Lexus, whose dealerships had become much fancier. That plan was called the Cadillac Luxury Buying Experience. The image above is from the press release announcing the plan. As you can see, it didn’t result in a wave of enthusiasm. (More on page 2)
Cadillac has made many missteps in our opinion. The naming convention confusion that has an XT5 sitting next to an XTS on the showroom floor was amplified when Cadillac named a new concept car Escala, only two letters different than the existing Escalade. This confuses shoppers. Cadillac also missed the premium crossover trend. Lexus sells two premium crossover models, plus hybrid models of both. Lexus has a third coming in 2017. Cadillac has just the one and continues to focus on new full-sized super sedans and coupes, which every brand is selling less of every passing year. However, this dealer reduction move makes good sense. Many of Cadillac’s dealers have mentally checked out. To be successful, the company needs to have every dealership fully committed to the Cadillac brand.