Q&A: HOWARD DRAKE, CADILLAC NATIONAL DEALER COUNCIL

Cadillac dealers adjusting to busy transition

Howard Drake
Age: 54
Dealer since: 1999
Dealership: Casa de Cadillac, Sherman Oaks, Calif.
Average monthly sales: 50 new, 25 used
Quote: "I think all of us are a little frustrated, given the quality of products that we've got and new advertising and media wave. Everybody wants things to move faster."
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To say Cadillac has been going through a busy transition would be an understatement. In the last 18 months the brand has introduced two new nameplates -- the XTS large sedan and ATS compact sedan -- and launched the redesigned CTS mid-sized sedan. The new ELR plug-in coupe and the redesigned Escalade SUV roll out during the first quarter.

And Cadillac's top sales and marketing executives are new to General Motors. Marketing chief and former BMW executive Uwe Ellinghaus started his job this month, while sales chief Bill Peffer arrived from Nissan in October. And Cadillac last year hired a new advertising agency, Rogue.

Cadillac dealers are "craving stability" from the factory while also trying to increase the expertise of their sales staff to keep up with all of the fresh product, says Howard Drake, chairman of the Cadillac National Dealer Council.

Drake, owner of Casa de Cadillac in Sherman Oaks, Calif., said the council is urging Cadillac executives to provide sufficient marketing support for all the vehicle launches. He spoke with Staff Reporter Mike Colias.

Q: It looks like 2013 was the best in recent memory for Cadillac dealers, from a sales standpoint.

A: Yes. But we're struggling to get back to where we were in middle 2000s. We have a ways to go. We went into 2013 with two new models, ATS and XTS. What everyone is trying to reconcile is, "Yeah, things are a lot better. But how good should they be?"

What's the missing ingredient?

We went a long time with only three models: Escalade, CTS and SRX. Now we're trying to sustain a family, including ATS and SRX, which are our volume nameplates. We're trying to bridge Escalade until the next one comes out in the spring. And we're launching a new CTS and ELR.

We're not used to pushing a bunch of different segments at the same time. That's a competency that we're just developing now. I believe they're up to the challenge. But that's all new.

Cadillac says roughly 70 percent of ATS buyers are new to the brand. How are dealers approaching the opportunity for a new, younger buyer?

ATS is No. 3 in the segment nationally. But I think there's definitely more upside for that car. The ATS is a wonderful platform to grow customers into CTS and SRX and Escalade.

Our competitors have done a good job with that. That mid-sized luxury segment, with the Mercedes E class and BMW 5 series and Audi A6, those tend to be people who have been grown into that brand through other models. This is the first time we've had a good car to do that same thing.

How are dealers adapting to Cadillac's new pricing? The new CTS had a huge increase.

There's a strong sentiment in the press that it's as good as or better than other cars in the segment. ATS is in the same spot. That gives GM license to price those cars with the competitors.

We're not used to having product that can go toe-to-toe with the Germans. Now we've got that. But dealers aren't used to selling head-to-head, price-to-price, against them. That's a huge adjustment. Our salespeople aren't used to looking Mrs. Smith in the eye and saying "Our car is as good as a 3 series or a 5 series." The old song was, "Well, no, it's not as good, but it's 50 bucks less a month."

Is there a sticker shock factor with this CTS rollout?

Absolutely. But when new models come out for our competitors, does that drive a 5-series driver down to a 3 series? Sometimes it does. So hopefully a lot of our CTS customers will find homes in the ATS. If you think about it, the old CTS was really an awkward 'tweener, between a 5 and a 3 series. So at our store, when a CTS customer walks in, we don't show any predisposition toward moving them up or down. It's whatever is best for them.

There is considerable overlap on CTS and XTS pricing. Is that a problem?

We haven't felt that in our showroom. If it does become an issue, I think it will probably manifest itself in the Vsport, because both are getting the twin turbo 3.6-liter. But it's rear-wheel vs. front-wheel. They're different sizes. I'm not worried about it.

What will the ELR plug-in hybrid do for the brand?

GM is at the forefront of that whole extended-range movement with the Volt, and getting rid of range anxiety. The platform is good, it's a unique shell, and it's a great interior.

Is there concern about the $75,995 price?

There is some concern. But it's going to be a lease-oriented vehicle because they'll be selling them in California and other lease-heavy markets. The feeling is that the price doesn't prohibit a lease-transaction price that will resonate in the market.

I hear occasional complaints about the CUE infotainment system. Is that an issue for customers?

CUE came out on the toughest model there was, from a demographic standpoint, with the XTS [in May 2012]. No one is going to hide from the fact that the CUE was a tough launch. We had several reflashes of the system. Having said that, Cadillac really mitigated the problem the right way. Bob Ferguson really got in the middle of that and said, "This is a problem that I'm going to help solve."

It's gotten progressively better. We've gotten very little pushback on the '14 models. One thing we have to do a better job of as dealers is showing people the functionality in the steering wheel controls and the voice-recognition controls.

Cadillac executives have said to expect a slew of new products. What is most important to get into showrooms?

If you look at Lexus, the RX is very unsexy, but that's the axis that it all turns around from a volume standpoint. So, as far as upside for Cadillac, I think it's the SRX.

I think you'll see an increased focus on SRX. It's such a good car within the segment, it deserves better. We had a mid-cycle enhancement for the 2013 model year and we've gotten almost no bump out of it. I think Cadillac is going to recommit to SRX this year.

What else does the lineup need?

I think the next V series will help a lot. Having that combination of a socially responsible and good-looking car in the ELR, a great SUV in the Escalade and then to go out and make a world class V series performance sedan, that will tell people how substantial this brand is and how good the engineering is.

It's been years since we've seen a new V series. What do dealers expect?

My expectation is we'll see a V series for both ATS and CTS sometime in 2015. The V brand is so powerful, there's an unbelievable amount of pressure to keep up that V lineup. I think GM is clearly going to respond. There are V clubs and disciples out there. They really, really love those cars.

What is the dealer council's biggest message for the factory in 2014?

We definitely have a stronger, better positioned lineup. But, of the hundreds of thousands of cars that dealers have sold over the last few years, what are the paths for old customers to become new customers? Where does that old CTS guy go? How do we talk to him? When is it appropriate to push him up or down?

It's a complicated process, aligning our old customers from their existing vehicle to a new one. Take DTS [sedan] owners. Is it better to move them to a CTS or an XTS?

And the council's message for dealers?

Cadillac got away from actual field training. Now they're dragging our salespeople through a full day of exhaustive product training. We're doing in-car training and tons of online training. We've got to transition into a full-spectrum luxury brand. Dealers need to bulk up for that. That's going to take more training and resources that we haven't had to dedicate.

Cadillac has a new marketing chief, new top sales executive and a new ad agency. What do dealers think of the turnover at such a critical time?

Dealers are craving stability with GM leadership, there's no question. There have been different reasons for the turnover and dealers can understand that. But the dealer body desperately wants Bob Ferguson to stay settled and our new leadership team to get traction and stick to the same advertising agency. We're ready for some stability.

Cadillac has used Ritz Carlton as a customer-service model. The Cadillac dealer network rates extremely high in sales and service satisfaction scores. How much more can be done?

I think the Ritz thing was focused on what good service and true luxury looks like. It was more of a tonality thing. Now we have to really start explaining real-life features and benefits in a way that customers will understand. There's a ton of technology on these cars. There's a lot of value we need to sell on the way these cars work.

How has Cadillac done on customer retention?

Bolstering retention is big. When you've got free maintenance included, we should have 100 percent of our customers coming back to experience the store and really build a relationship.

Right now we're hovering around 60 percent. We've got a long way to go.

You can reach Mike Colias at mcolias@crain.com.


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