DETROIT -- Cadillac’s effort to transform its retailer network, known as Project Pinnacle, will cost $800 million in its first three years, the brand’s president, Johan de Nysschen, said Monday.
Pinnacle, which starts April 1, overhauls how dealerships earn payments from Cadillac for meeting brand standards. Dealerships are divided into five tiers, largely based on their sales volume, with larger stores able to earn higher payouts by making larger investments in the brand.
For now, Cadillac is running a simulated version of the program, allowing dealers to see how they would have done in comparison to their previous arrangement with the factory. In November, de Nysschen delayed the program’s start date by three months to give dealerships more time to earn payouts.
Since the simulation began in October, de Nysschen said some dealerships would have seen their payout increase, while others would have earned less. The goal, he said, is that all dealerships earn more under Pinnacle, and in turn make Cadillac a stronger brand.
“The program is not a principle that says you rob Peter to pay Paul. Everybody can qualify. Everybody can earn more money,” de Nysschen said in an interview. “And so it’s entirely within each dealer’s capability. I’m not talking about meeting sales targets. I’m talking about brand standards, like having trained people, like having a Cadillac service reception counter, like having courtesy cars -- things that luxury customers expect. These things are in the domain of every dealer’s control. They can decide whether they want to do that or not.”
De Nysschen said Pinnacle will cost $800 million more than Cadillac’s current dealer incentives, regardless of how many dealerships comply with the standards for their tier. That’s because Cadillac has committed to distributing any unearned funds among the dealers that did meet their targets.
“When dealers say that we set these brand standards because we don’t want to pay them, this is not true,” de Nysschen said. “We’re going to pay out the money. It’s up to the dealers to determine to whom we pay it out.”
Pinnacle, announced in early 2016, has been criticized by some dealers and state dealer associations as unfair to smaller retailers and unlawful under some state franchise laws. De Nysschen has rejected accusations of illegality and, aside from some “fine tuning” and the delayed start, steadfastly moved forward with the program, saying Cadillac can not compete against other luxury brands without dramatic changes to its retail network.
Of Cadillac’s 924 U.S. dealerships, 832 enrolled in Pinnacle by the Sept. 30 deadline. Those that declined accounted for only about 1 percent of the brand’s 148,367 units sold to retail customers in 2016. Fewer than 20 dealerships signed up for buyout offers of as much as $180,000, which were offered at the request of state and national dealer groups.
De Nysschen said many of the complaints are based on misunderstanding the program and that he has been in contact with dealer groups that were upset about it.
“I believe honestly that every legitimate concern that has been raised has been addressed,” he said. “If a person is unhappy because the status quo is not being maintained, that I cannot address.”