By on March 15, 2010

It’s a little-known fact that nearly half of the 2,000 or so dealer franchises that GM began winding down during bankruptcy were Cadillac stores, most of them located in rural areas. The General’s plan was to focus Cadillac’s dealer network on  standalone stores in major metropolitan areas, following the strategies of more premium luxury competitors like BMW and Lexus. But having marked 922 largely small-town Caddy dealers for death, GM saw 2009 sales of its luxury brand fall 15 percent, or twice the rate of Buick and Chevrolet in the same period. The lesson: small-town Cadillac dealers (like attempts to sell the brand in Europe) are worthwhile after all. Automotive News [sub] reports, the majority of those dealers being reinstated are small-town Cadillac dealers. Will Cadillac’s brand integrity suffer by having to serve the small-town American market as well as competing with the European brands? Probably, but at least Caddy dealers can take heart knowing that things could still be worse: they could be Lincoln-Mercury dealers.

While GM flip-flops on whether it wants small-town dealers representing its “world-class luxury” brand, Lincoln-Mercury’s dealers are sticking with their long-standing strategy: survival by any means. Undistracted by esoteric debates over the importance of dealer network image to the overall brand, Ford’s L-M dealers are desperate for anything to keep their cashflows steady. Literally, anything. One dealer tells Automotive News [sub]:

The only other answer is to find another franchise, any other type of franchise — Suzuki, Honda — you name it. We’re a dwindling group of dealers.

You know you’re in trouble when selling Suzukis starts to sound good. Ford is technically working to consolidate its L-M network in metro areas, although without the bankruptcy dealer-culls enjoyed (but since reversed) by GM, the work has been more methodical. In further contrast to GM’s post-bankruptcy strategy, Ford is focusing on eliminating standalone Lincoln-Mercury dealers, and was down to 292 at the end of 2009, down from 357 at the end of 2008. Also, consolidation is focusing on metropolitan areas, as Ford would likely prefer to allow its rural dealers to die of natural causes and sell as many cars as possible first.

And dying they are. An Automotive News [sub] survey shows that nearly all Lincoln-Mercury dealers believe that their two brands don’t have enough products to attract the kind of customers they need to survive, and most believe themselves to be at a disadvantage compared to Ford’s three-brand stores. High costs and insufficient service business are similarly hurting Lincoln-Mercury dealers, and most report no assistance from Ford in breaking out of the L-M ghetto.

Though the cases of Cadillac and Lincoln-Mercury are different, they both speak to Detroit’s inability to pull off modern luxury brands. And in both cases, dealer woes reflect larger issues surrounding each brand. In the case of Cadillac, the story is of identity crisis. Is Cadillac a European-grade maker of world-class, dynamically-focused and fashion-forward driving machines, or the small-town America symbol symbol of petty-bourgeois success, with an emphasis on the old-school American  values of wide seats, big power, and a cosseting ride? The brand’s product line displays this identity crisis (compare CTS and DTS) as much as the dealer network does.

That volume is dictating a pendulum swing back to the small-town strategy (or at least an embrace of this split-identity) shows that GM is no closer to figuring out what it wants out of Cadillac than it did pre-bankruptcy. In fairness, the next two products coming down Cadillac’s development pipe show that Cadillac’s schizophrenia is here to stay: a “true 3-series killer” known as the ATS isn’t going to set rural markets on fire, but an Epsilon II-based XTS “flagship” isn’t going to do much for Caddy’s Euro-appeal either.

In the case of Lincoln-Mercury, the problem is of not-so-benign neglect rather than disjointed leadership and vision. Ford’s luxury brands are, in many ways, sticking with the old-school Detroit formula for luxury even as the Ford brand emerges as a paragon of global brand-management. Ford has eschewed heavy investments in Lincoln-Mercury product lines of late, and as its “luxury” options have stagnated into the most obvious bunch of rebadges to come out of Detroit, it’s allowed its dealers to suffer along with them. Ford insists that there are no plans to consolidate rural dealers, but that it also wants to cut the number of standalone dealers.

With only one Mercury product rumored (a variant of the forthcoming Focus), Lincoln-Mercury dealers won’t have much choice but to consolidate into three-brand dealerships, as no dealer will survive much longer on the thin gruel of L-M’s current product portfolio. Once that transition is complete, expect Mercury to die, and Lincoln to begin slowly rebuilding some luxury credentials. If this is in fact Ford’s gameplan, it will be a long, slow strategy to implement, but at least it heads in a sustainable direction. With Cadillac bouncing back and forth between missions, visions and dealership strategies, Lincoln-Mercury’s product neglect and dealer starvation almost seems like the rational approach.

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24 Comments on “Detroit’s Small-Town Luxury Lament...”


  • avatar
    seanx37

    Or maybe their Cadillac sales are down due to the fact that we are in the start of Great Depression 2. Or that except for CTS, their products suck.

  • avatar
    Richard Chen

    An area LM dealership uses a former Pizza Hut as its used car showroom. Although Bing Maps still shows a pit in the ground and an Isuzu sign on the building, those have both been, uh, rectified.

    It doesn’t look good given that there are newer Infiniti, Mercedes, and Porsche+Audi dealerships across the street.

  • avatar
    bmoredlj

    I see Caddy’s position with a glass-half-full perspective, and Lincolns with a half-glass-empty one, if that makes any sense. Even with 922 dealers in wind-down, Caddy sold 9200 cars, 4500 fewer vehicles than Lexus in February. (BMW and Merc beat them both.) Lincoln was down in Audi territory with under 7000 sales that month. When you look at Lexus’s product lineup, everything’s pretty much up-to-date from the IS to LS and RX to LX. Caddy’s lineup is in flux, but they need both the ATS and XTS (not to mention an Escalade replacement soon) in order to have a hope of closing the gap with Lexus. With Ed Whitacre stressing volume, they will probably keep Cadillac where it is, never tacking too far toward classic Amerilux or fully Euro-dynamism, but trying to cater to both audiences. The sales dip caused by a mostly small-town wind-downs would seem to support this. One suggestion I’d have once their new product is out: consign all DTS and STS sedans to a quiet corner of the dealer lots and institute a strict and permanent ban on all landau roofs.

  • avatar
    porschespeed

    Drive 50 miles to have dinner at a good restaurant? Does anyone even think about the drive?

    Drive 50 miles to get the car you want? That’s a stretch? Really?

    “Baby, I know you want a 5-series, but the dealer is an hour away, and there’s a Chevy dealer right here in town. You’ll be ok with a Malibu, right?”

    Any major purchase that you wouldn’t drive an hour, or two, to make, means the product was not differentiated from the other easily available offerings.

    Oh yeah, Ed’s got a handle on this car-business-thingy…

    • 0 avatar
      HerrKaLeun

      if Cadillac was the only “luxury”brand it wouldn’t matter. but if every other brand is closer than 50 miles (and service is important too) it matters.

      I barely can arrange oil changes in my busy schedule and the Mazda dealership is on my way to run errands. 50 miles away? Are you Kidding? And I value my car serviced by the people who are trained to do so, even if it costs me $ 5 more. but 50 miles more is not acceptable.

    • 0 avatar
      Brian E

      It’s not 50 miles to buy the car that matters. It’s 50 miles any time you need anything from the dealer. It’s 50 miles to pick up a part and 50 miles to get a warranty repair.

      Most buyers are uncomfortable with that sort of thing. It’s one thing to drive further to get a better deal, knowing you can still get it serviced at a local dealer. It’s another thing to have help no closer than 50 miles away, when there are other options which are more convenient.

    • 0 avatar
      dmrdano

      I agree with Brian E (that rhymes, even). When your car is making “that thumpin’ sound,” the last thing you need is a 50 mile drive. Proximity does matter. I am actually thinking about a Toyota, since they are only about 25 miles away, and its all freeway (so I don’t need the brakes anyway!).

    • 0 avatar
      porschespeed

      If you are so busy that you don’t have an extra coupla hours in your schedule every six months or so, you may wish to consider hiring an assistant.

      If the vehicle actually requires warranty work often enough to even be a consideration, what kind of cars are you buying?

      Parts? Will the UPS/Fedex/USPS person not come to you?

      Honestly, I do not know a single soul who would blink at the thought of driving 45-60 minutes, dropping their car for service, taking their loaner and being on their way. Doesn’t everybody have at least one or two errands a week that takes one to the other side of town? Why is the care different? I don’t understand.

      I used to live in a small town about 60 miles from a metro. Even the long-term locals would take their domestics to a ‘big’ dealer in the metro – who wants Cooter and Uncle Jesse in the two-bay garage messing with their car?

  • avatar
    ClutchCarGo

    I don’t see why Cadillac can’t succeed as a luxury brand by offering both plush barges for the corn-fed older demographic and lean, mean driving machines for the Euro demographic. The key is to push appropriate technology driven features for each demographic, and to avoid trying to cross-market the two.

    • 0 avatar
      JeremyR

      By “cross-market” do you mean something other than selling them under the same brand on the same showroom floor? Perhaps Buick would be a better brand for the former type of car…

  • avatar
    Dynamic88

    @porschespeed + 1

    GM still has enough brands – enough luxury brands- that one can be Boulevard Cruisers and one can be Word Class. GM won’t do it though. Brand management takes discipline, and that just isn’t in GM’s vocabulary.

    Ford’s plan appears to be this – get rid of LM dealers by converting as many as possible to Hyundai (or other) dealers. How long before the LM dealers starts to ask themselves why they’re bothering with the LM lines?

  • avatar

    Way back when, TTAC ran a piece of mine about how the domestics’ small town dealers are a strategic advantage over Toyota, which only locates dealers in cities with ~100K residents or more. Who wants to drive 100 miles round trip to shop a car?

    FWIW, the Cadillac dealership culling didn’t just affect small towns. As I pointed out in my earlier piece, it’s the glut of GM dealers in the big city markets that hurts them the most (that’s how come insane Maxine Waters was so concerned about minority owned dealerships – which are primarily in urban markets). Dealers selling the same brand in close proximity end up having lower transaction prices due to price competition, end up being less profitable, and having higher costs per car.

    Right now there no Cadillac dealers within the city limits of Detroit. The Caddy dealership in Detroit, Dalgleish Cadillac, closed last November. Of course, few residents of the city proper can afford to by a new Cadillac. They may still build Cadillacs in Detroit (the DTS at the Poletown assy plant), but you can’t buy new one south of Eight Mile.

    • 0 avatar
      ihatetrees

      As I pointed out in my earlier piece, it’s the glut of GM dealers in the big city markets that hurts them the most… Dealers selling the same brand in close proximity end up having lower transaction prices due to price competition, end up being less profitable, and having higher costs per car.

      +1. That’s especially true in older, eastern rust belt cities – the result of a long ago ~30 percent market share. Having more places to shop CAN help a brand, as long those places weren’t dumps or managed by Bill Heard style sociopaths. Unfortunately, in GM’s case, many were.

      Unlike Fiatsler or GM, I’m rooting for Ford to survive. But the cratering of Lincoln-Mercury is one of the horror show aspects of Ford’s recent history…

  • avatar
    porschespeed

    @Ronnie,

    For most people, their car is second only to their house on the list of expensive purchases.

    Who is not going to drive 100 miles round trip to shop a car? Who?

    Perhaps I’ve lived a different life, but I really don’t know anyone who would even blink about doing 100 miles in a day. That’s putzin’ around town runnin’ errands miles, not a journey that requires forethought.

    If Cadillac builds even a *mildly* compelling product, GM
    will have no problem getting people to drive 50 miles each way to pick one up.

    • 0 avatar
      Dynamic88

      Once again I must agree with porschespeed. I know people who’ll drive 50 miles to go to a Walmart to save 17cents.

      Even if someone trades every two years, a 100 mile drive every other year isn’t a big deal.

  • avatar
    blowfish

    killing the rural dealers is not a wise choice, city folks perhaps are too slick to drive these big barges.

  • avatar
    Runfromcheney

    My local Lincoln-Mercury dealer (Crest LM) has resorted to selling a handful of other luxury brands brand new. I saw a brand new Lexus LS460Lh for sale, sitting just outside the showroom.

  • avatar
    educatordan

    I concur with those who say that people will travel for decent products. I live in a town of 20,000 but the closest Honda, Hyundai, Kia, Suzuki, Mitsubishi, and Subaru dealers are in either Farmington, NM or Albuquerque, NM. Yet I personally know residents who purchased these cars new in those cities simply because it was what they wanted. Quality products will bring customers.

  • avatar
    John Horner

    Like I said at the time, all the dealer slaughter actually accomplished was to reduce opportunities for GM to sell vehicles. It was a dumb idea put into action in a foolhardy way. That GM continues to try and pretend that Cadillacs are somehow a better German car is also brain dead.

    Rx:

    1) Bring back traditional Cadillac names.
    2) Make Cadillacs luxury cars in an American idiom.
    3) Never, ever mention anything German in Cadillac advertising. Cadillac’s market could care less about the Nurberringding. In fact, allusions to German race tracks detract from the Cadillac image.
    4) Be proud of the best of Cadillac history and deliver modern vehicles consistent with it. Dripping with style. Quiet as a coffin. A few over the top features.

    Let me say it again, loud enough for GM to hear: SIMPLY FORGET ABOUT THE GERMANS AND LET CADILLAC BE CADILLAC!

  • avatar
    50merc

    If my guess is correct, educatordan lives in Gallup. So the drive to those Honda, Hyundai, Subaru, etc., dealers is 121 or 138 miles. Even though the traffic would be light (especially on Rte. 666 — hey, that’s Tony Hillerman country!) either way, it’d be about four hours round trip. So yes, SOME people will go that far to get the brand they want. Most won’t. Gallup has stores for Chevy, Buick, GMC, Ford, Mercury, Lincoln, Chrysler, Dodge, Jeep and Toyota. I certainly could find among that group something I like. A four hour round trip for warranty work or recall fix? Not for me.

    And John Horner: you said it perfectly. I bet Buickman agrees, too.

    • 0 avatar
      educatordan

      Correct, Amigo, on all points, except that the Chrysler dealer lost his franchise and there is a Nissan dealer here in town. I meant to mention the distances. I really wish we would get a Hyundai dealer in town though, the used car market around here is crap if your looking for solid low mileage stuff. I’d like to at least have Hyundai and Kia as an option for new cars at used car prices. Thankfully I’ve made friends with the family that owns the GMC/Buick franchise (taught several of their children/grandchildren) and if I ask nicely and far enough in advance they’ll try to find the right car for me at auction if I’m interested in used.

      Personally if I really wanted (and could afford) a new Legacy GT sedan or a Honda that I really loved I’d drive that far.

    • 0 avatar
      porschespeed

      I think they removed all the ‘666’ signs years ago – beyond the continuous theft by collectors, the superstitious types objected…

      Interestingly, the scholars now believe the number to be ‘616’, but that’s for another day.

      Perhaps things have changed since I lived in ABQ, but the posted limit was 70, and nobody drove less than 80-85 once out of town.

      So, like 3 hours round trip. Shorter than many Bay Area commutes I’ve had. When you live in a town like Gallup, that’s just part of the experience.

      If the vehicle is merely an appliance (i.e., a work truck), then I guess I get it. But if that rule applies to a Cadillac purchase, I just really don’t get it.

    • 0 avatar
      educatordan

      666 became 491 years ago, shock of shockers it did not lower the yearly death toll on that curvy, high rate of drunk drivers, too many side access roads, poorly maintained stretch of highway. BTW for any curious readers it was named 666 for being the 6th US highway branching off of Route 66 as you drove from California east.

      And like you and I said “porschespeed” if you want a car not offered by Gallup dealers you just go and get it. If I could afford a new Genisis I’d go get one, if I wanted a new Lexus, I’d go to Alb to get one. If Cadillac (GM) made compelling products people would drive a few hours to get one.

  • avatar
    jacad

    What Cadillac/GM underestimated was the influence of the local dealer. In many small towns across America, the affluent residents bought from their friend the Cadillac dealer often because it made their social life easier. Close the dealership and make him drive fifty miles to purchase and obtain service from strangers, everybody with a luxury brand enters the picture. As we all know, Cadillac is really short today on actual world class luxury product.


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