LOS ANGELES -- Cadillac is drafting a retail incentive program that could significantly boost factory payments to dealers who invest in their stores, new technology and other elements to improve the customer experience.
Cadillac President Johan de Nysschen said the program could add as much as $850 million to $1 billion in "incremental profit for the dealers" over the next four to five years. Cadillac is working out details of the program, which will be floated to dealers at a national meeting in February.
"If we want to have a strong brand, we need to have a strong franchise," de Nysschen told Automotive News this month on the sidelines of the auto show here. "To do that, it means the dealers are profitable and that they're able to invest in the business and to build the customer experience."
De Nysschen said he has vetted the idea with GM's top leaders, including CEO Mary Barra, President Dan Ammann and CFO Chuck Stevens.
The program eventually would replace two programs that have become key profit centers for most dealerships: Standards for Excellence, a quarterly bonus program that rewards dealers for increasing sales and hitting customer-service targets; and Essential Brand Elements, which pays money primarily to defray the cost of dealership renovations. Combined, they can dole out hundreds of thousands of dollars per quarter to a decent-size dealership.
The programs today are volume-based. Standards for Excellence requires dealerships to grow year-over-year quarterly sales by at least one vehicle. Essential Brand Elements, which expires in fall 2016, pays a quarterly bonus of $300 to $700 per vehicle ordered from the factory.
De Nysschen said the new program won't emphasize growth as much.
"It's got to be a more performance-oriented model, not one that just rewards sales, but rather one that rewards investment in the franchise, the right behaviors, investment in people," he said.
But dealers "will need to work for the money," de Nysschen added.
"Nobody gets paid for just participating. But this is the point," he said. "We need to give them the potential to earn even more" than they can today.
In January, Cadillac said it would work with smaller dealerships on a "boutique" showroom model that could be applied to stores with multiple brands. De Nysschen downplayed the potential requirements, saying, "We're not going to demand Taj Mahals."
Many dealers in recent years have completed store overhauls under GM's dealership image program -- some are still under construction -- and likely wouldn't be eager to start new projects.
Will Churchill, dealer principal at Frank Kent Cadillac in Fort Worth, Texas, and a member of the Cadillac National Dealer Council, says dealers are likely to view any change to the programs with apprehension.
He declined to comment on discussions between the council and the factory but said, "Cadillac is working together with the council to try to get it right."