Cadillac to close 400 Dealerships in the US of A

The big buzz around Detroit is the news that Cadillac is to offer 400 of its dealerships the chance to be bought out of their franchise, for sums ranging up to US$180,000. That's assuming they do not want to spend the money upgrading their showrooms and facilities, and adapt to the luxury brand's new sales and incentive dealership programme that will be unveiled to the public at the end of the year.

Cadillac's President Johan de Nysschen's plan is to overhaul the brand through Project Pinnacle, which is said to be a sweeping set of new prices and sales initiatives in an attempt to elevate the brand, but one that will cost the company an estimated US$50 million. In a world of ever increasing number of dealerships, this plan may seem to be somewhat counter intuitive, especially when you consider that this would represent 43% of its North American dealer network. However, these dealers sold fewer than 50 cars per year each and account for just 9% of the US sales, and will leave them with roughly 525 Pinnacle Dealers.

De Nysschen has previously said that Cadillac had too many dealers doing too little, and he may have a point. The direct competitors, BMW, Audi, Mercedes and Lexus, all have significantly smaller dealer networks than Cadillac yet command higher sales volumes. His plan is to separate the remaining dealers into five categories, with the larger dealers in the higher tiers being able to earn higher incentives by meeting ever more stringent standards.

In the lowest category (number 5) is probably where the biggest change comes. These dealers, who would be low volume players, would not have to carry any inventory, making them in effect a virtual showroom, where customers will view cars with virtual reality goggles before ordering their model of choice. The scheme is set to become reality on January 1st 2017.