DETROIT -- Most of Cadillac's larger U.S. dealers are on board with the brand's controversial new incentive program, Project Pinnacle. But most smaller dealers haven't signed up yet, and at regional meetings to discuss the plan, some of them asked for a way to just get out instead.
So last week, Cadillac responded with buyout offers from $100,000 to $180,000. Rather than make what could amount to a sizable investment in the name of elevating Cadillac's brand image and customer experience, those dealers can simply take the check and walk away.
The offers might not seem like a lot of compensation for all that dealers have poured into their businesses over the years. That's in part because Cadillac says it isn't trying to push dealers out; it's just offering a simpler, cheaper path. At any rate, Cadillac said, the 400 dealers being offered a buyout are contributing little volume to the brand as it tries to catapult itself back into the top tier of the luxury market.
The eligible dealerships accounted for 43 percent of Cadillac's U.S. retailer network in 2015 but only 9 percent of the brand's sales. They averaged just 25 units -- roughly two a month -- vs. 192 for the other 525 dealers.
Cadillac President Johan de Nysschen says enrolling in Project Pinnacle would help those smaller dealers improve their business and become more profitable, but it won't be painless.
"This is going to be a long, arduous and challenging journey and certainly not one for the faint-hearted," said de Nysschen, whom General Motors hired in 2014 to revitalize Cadillac. "Some people may choose to make life a little easier than what lies ahead."
The offers have a median value of $120,000, de Nysschen said. All of the eligible dealers sold fewer than 50 new Cadillacs to retail customers in 2015, and all but six have other GM franchises. For 290, Cadillac represents less than 10 percent of their overall business, de Nysschen said.
They will have until Nov. 21 to decide whether to take the money. They would then have to wind down by the end of 2017.
Richard Sox, a lawyer in Tallahassee, Fla., who represents dealers, said his Cadillac clients aren't interested in the offers. "The vast majority of the 400 dealers are dualed with other GM brands, and they must have the Cadillac business to make the entire enterprise profitable," Sox wrote in an email. "What is being offered would not come close to covering the hole that would be left in covering dealership overhead."