GM Offers Buyouts to 400 Cadillac Dealers

By Mike Colias and John D. Stoll 

General Motors Co. is moving to cull the ranks of Cadillac dealers, offering 400 owners of its smallest luxury-vehicle sales outlets a modest buyout as it reshapes the brand's image to better compete with rivals.

The Detroit auto maker will provide as much as $180,000 in "transition assistance" to U.S. Cadillac dealers unwilling to invest in a set of new standards introduced by brand chief Johan de Nysschen. Cadillac has 925 dealers, and the 43% being offered a buyout typically sell fewer than 50 models a year.

Dealers were informed of the buyout plan on Friday. They have been working with GM management on a brand overhaul for several months and suggested the company offer a buyout to dealers not wanting to make investments in store upgrades, the spokesman said.

A spokesman said the buyouts are optional and available until Nov. 21. Many of the affected dealers have Cadillac stores coupled with other GM brands, such as GMC or Chevrolet.

Cadillac sales volumes have fallen far behind German auto makers and Toyota Motor Corp.'s Lexus brand in the U.S. in recent years despite substantial investment in the product line. Mr. de Nysschen has said changes need to be made to the retail network, and earlier this year rolled out a plan called Project Pinnacle to address staffing, service and other operational details.

BMW AG, Daimler AG's Mercedes-Benz, Audi AG and Lexus each have about a third as many dealers in the U.S. as Cadillac. While lower dealer counts mean these brands have less geographical reach, the stores have higher sales throughput that typically leads to richer dealer margins and more willingness by store owners to invest in upgrades.

Cadillac U.S. sales this year through August of 103,000 are down 6% compared to the same period a year ago. Lexus, BMW and Mercedes-Benz all have sold more than double the volume over that period. Cadillac once only battled Lincoln for dominance in the U.S. luxury brand, and is now dependent on sales in China for growth.

Mr. de Nysschen's Project Pinnacle comes seven years after bankruptcy and is designed to organize dealers in tiers, a strategy that has been met by some disapproval by dealers accusing the executive of unfairly targeting smaller stores. Prior to the buyout offers, low-volume dealers were given the option of having inventory-free virtual showrooms.

The specifics of the buyout program were first reported by Automotive News.

Write to Mike Colias at [e-mail] and John D. Stoll at [e-mail]

(END) Dow Jones Newswires

September 23, 2016 16:56 ET (20:56 GMT)

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