GM Cadillac’s New Retail Plan Face Resistance from Dealers

Project Pinnacle would create a roughly 8% difference in cost of vehicles between top-tier dealers and those not participating

In a letter signed by dealer associations from seven states, Cadillac President Johan de Nysschen was accused of creating a program that they consider “is the most serious attack on their survival they have seen.” Mr. de Nysschen has been in the process of rolling out “Project Pinnacle,” which aims to classify dealers into five groups and limit the inventory or showroom space that the smallest dealers need.

Project Pinnacle would result in the creation of virtual dealers where the smallest dealers would have no inventory and rely on virtual reality headsets for much of the sales process. Many of these stores would be rural Cadillac dealerships that sell less than 100 cars annually.

While GM significantly reduced its dealer count in bankruptcy court seven years ago, its 925 Cadillac stores vastly outnumber the dealer bodies for luxury rivals selling far more cars, including BMW AG and Toyota Motor Corp.’s Lexus brand. State franchise laws limit GM”s ability to take further action on shrinking its retail footprint.

There will be a roughly 8% difference in the effective cost of vehicles between top-tier dealers and those that don’t participate, which translates into thousands of dollars per vehicle. They say 60% of dealers saw an immediate and pronounced drop in the value of their franchises after Project Pinnacle was announced, and said those stores are in danger of being closed.

Cadillac sold 87,572 vehicles in the U.S. through July, down 8% from the same period a year ago and equating to under 1% market share. That is less than half the volume sold by Daimler AG’s Mercedes-Benz, BMW and Lexus during the same period.

Read Full article at WSJ

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