Late last year, Cadillac said it would pay dealers to give up the franchise if they were unwilling to sell electric vehicles. At least a fifth of the dealer network accepted a buyout.
The dealer council suggested those buyout offers, said Butler. The council said smaller dealers needed another option. Many were not prepared to spend $200,000 on EV infrastructure for a number of reasons, said Butler, who is also executive manager of Suburban Collection, a Michigan-based dealership group with 33 automobile brands in 54 locations in Michigan and California.
"The message is, 'Here is where Cadillac is going 10 years out. [If] you sell eight vehicles a month, and EVs are not even on the radar for your area, we'd be glad to have you come on board. But in the event you don't think you want to make the investment, here's a way that you can graciously exit the business,' " said Butler. "I've been getting a lot of feedback that this is really a humane way of dealing with this. It was not a move to try to pare down the market at all. It was just a move that if you didn't see a future with us, here's another way to go if you choose."
Cadillac's first EV, the Lyriq midsize crossover, is due in 2022.
Butler, 66, spoke with Staff Reporter Hannah Lutz about Cadillac's response to the pandemic, dealership profitability and digital retail. Here are edited excerpts.
Q: How has Cadillac helped dealers navigate the changes brought about by the coronavirus pandemic?
A: Cadillac, in the beginning of the second quarter all the way through the third quarter, did away with the objectives and went with flat pays so that dealers automatically earn Pinnacle regardless of achieving any objectives. Production was down for a while, so availability of inventory was low. Secondly, the pandemic really was not even throughout the country. There were many areas that were much more impacted than other areas. Pinnacle is a broad-based program. It treats all dealers equally, but the pandemic does not treat all dealers equally. We felt it was better to help the dealers through that with flat pay.
Cadillac and GM have been working on enhancing Shop-Click-Drive, a lot of the more mobile opportunities to deal with customers rather than having to do it face-to-face. In addition to that, they came out with the Cadillac Clean program. That was across all brands, but it really helped dealers to learn and implement processes in their stores and made customers feel more confident to come in when they had to.
Is there anything else Cadillac can do to help dealers?
They've done everything that we've asked of them to this point. I think they've been building enough products even though it's a little tight. But fourth quarter was fabulous for us. So I think right now, we're in a wait-and-see situation to see what the next couple months bring with the current pandemic. I'm hoping that we don't go backwards, but we're not really looking for anything right now.
What is Cadillac doing to direct dealers on digital retail?
GM is encouraging that we use one of the recognized systems, but Cadillac and GM are working very diligently on making Shop-Click-Drive the best of the best. It just takes a little time. By and large, if Shop-Click-Drive is the best, we don't have any problem shifting over to them. We just want a good solution for the dealership and for our customers.
Is Cadillac de-emphasizing physical facility requirements in favor of elevating digital ones?
No, they are not treating facilities as less important going forward. There is, from Cadillac and us dealers, a charge to get more into the digital world. We want to be better at both ends.
Right now, there is no change in Pinnacle related to the facility programs. We did relax some of the standards. Our plan for Pinnacle going into 2021 is keep it pretty much status quo in 2021 as it was in 2020 with some minor tweaks.
How have Cadillac's fixed operations been doing?
As you might imagine, in April they were terrible. It has been coming back strongly since then, getting a little bit better each month. Our body shops have not recovered 100 percent. They're still down about 20 percent from pre-pandemic times. That's reasonable, considering there are less people driving now.
There were parts shortages early on in the pandemic, and more recently they have been slowly getting rid of a lot of the back orders. More recently they have done a much better job. Across the country, revenue is back to pre-COVID levels, except body shops. That's still in a deficit position.
Have Cadillac dealers been using VIN View, General Motors' new inventory-tracking tool?
They've really made it available to the dealerships at large. That's a great way of seeing where your inbound product is. We're becoming more and more able to take a look at that and talk to our customers and give them a better idea when it's going to show up.
What are the dealer council's goals for this year?
There's going to be a couple of perennials. No. 1 is we are going to continue to work on dealer profitability. No. 2 is achieving Cadillac's sales objectives for the year. Another one: Set up a new subcommittee to the dealer council which is customer experience. It ties around streamlining, making simpler customers taking delivery as well as the dealership dealing with General Motors or Cadillac. Cadillac understands that for us to make it easier for the customer, they have to make it easier for us. This ties into setting up the future EV world that's going to be coming upon us.
How did the buyout idea originate? Was the council involved?
It was actually our idea. They came to a dealer council meeting, and they said, "Here is the plan for the Lyriq. We're going to do an assessment of every dealer, and we think the average cost will be about $200,000. What do you guys think?" We said, "We're all larger dealers; we're good with it. But what have you thought about the smaller dealers?" And they said, "They're going to have to do the same thing you guys do." And we said, "What if they don't want to?" So that's what really began the conversation, and that's when the council said, "Why don't you work on a solution for those guys who don't want to do this to go in a different direction?" So that's where the buyout came from. It was a dealer council suggestion or thought or idea.
When will most dealers start to prepare their facilities for EV sales and service?
They're already looking at it. The assessments will be in the second quarter. Some of the longer lead items might be to actually bring the proper electricity into the store. If it's a Level 2 charger, some of these older stores might not have the capacity within the store. So that's a bigger thing. They'd have to start moving concrete and putting lines in the ground. A lot of dealers have started looking at it at least.
What other steps are dealers taking to prepare for EVs?
Training will be much closer to availability or ordering. They haven't talked about the cadence for that yet. We did request that GM bring all the personnel that will be talking to customers up to speed on all the current EV readiness, including being able to talk about charging distances and Level 1 and Level 2 chargers and charging stations around the country. Typically an EV customer seems to be very versed in that area, and we need to be as versed as that customer when we're talking to them. Cadillac has already begun initiating that with salesmen and sales managers with the baseline information.
What type of EV do dealers want to see out of the gate — after the Lyriq launches early next year?
I haven't heard that dealers have asked for any particular vehicle. The direction General Motors is going, the higher-volume units would really help us a lot — trucks or big SUVs that we sell a lot of. I think an electric variant of those would be fabulous.
Cadillac had a new leadership team in 2020, with Rory Harvey and Mahmoud Samara at the helm after Steve Carlisle was promoted to president of GM North America. How did they do last year?
It has been fabulous. It's great to have a great friend like Steve Carlisle in his position. I have worked with Rory for several years now, so there's really nothing lost in translation there. I have known Mahmoud for a number of years. He was Western regional director; we have a store out there. I thought that was a great move for him in that position. We didn't miss a beat with those moves.
Have most Escalade buyers owned one previously, or are they new to Escalade and/or Cadillac?
It's both. A lot of the perennial Escalade buyers that want the latest, greatest. And then we are seeing a lot of people that are new to Cadillac that are coming in to get the Escalade. Customers have been marveled with it, and I haven't really seen anybody that has disliked the vehicle. What retailers like about it is we are seeing a product that is in very high demand that customers want, and they're not sitting around. That's the best of all worlds for us.
Is Cadillac doing enough to attract a diverse set of buyers?
They are. It appears to me that the age has been dropping. We are bringing in more diverse customers, both women and racewise. But I think most important is the buyer seems to be lower in age.
Are incentive levels where they need to be?
Cadillac is very reactive whenever we talk to them about sensing a certain segment or certain area of the country that doesn't seem to be moving fast enough. They always seem to work with us on shifting some of the incentives around to try to achieve the same thing. Looking at fourth-quarter sales, I'd say incentives are working well.
How are Cadillac dealerships' profitability levels at this point in the pandemic?
Since the second quarter, they have been doing very well. During the pandemic, a lot of us had to reduce expenses. When we were closed, there were a lot of people laid off, and we cut our advertising budgets and everything else. As we came out of that, it seemed that dealers were more disciplined, and they brought expenses back as needed. They didn't bring a lot of the fat, per se, into the organization. The used-car prices went through the roof coming out of the pandemic. Gross profit on used cars were fabulous, and with the shortage of new-car inventory, that helped the front-end gross on new cars. It was a combination of that, plus lower levels of expenses, which really helped our bottom line.
Is Cadillac doing enough to promote certified pre-owned sales?
We have done well this year. We could always do more to promote it. It's like the little brother to new-car sales, so it gets lost. That's something we have brought to the attention of leadership from the dealer council level: a much more vibrant, planned-out CPO marketing schedule for 2021 and tie it into the incentives.
So we'll pick a number of months where we're going to have a CPO marketing event and maybe tie 0 percent into it for that month or whatever it is.
What's missing in the product lineup?
I can't see a big hole. We've got most of the segments covered right now. It's very different [from a few years ago]. It's really nice having an XT4, XT5, XT6 and an Escalade. Before we had an Escalade and the SRX. It was either an SRX or an Escalade, and everybody else has got all these cool-looking crossovers. Now we have three cool crossovers. With the CT4, CT5, I would like to see more variants on those vehicles, like Blackwing. We'd always like to have a convertible.
Will Cadillac add any more gasoline-powered vehicles to the portfolio?
The adoption rate of EVs is a moving target. We don't want to put all of our eggs in one basket. Cadillac has indicated that they agree with that. We are still an ICE manufacturer at this point. All of our sales currently and many sales in the foreseeable future will be ICE vehicles. They are going to keep an eye on that and make sure we have fresh product in that arena until that switchover occurs. Whether or not they bring a new product, I don't know.