Playing the Long Game: Cadillac Softens on Project Pinnacle After Sales Shortfall

Matt Posky
by Matt Posky
playing the long game cadillac softens on project pinnacle after sales shortfall

Project Pinnacle hasn’t been incredibly popular with dealerships. Low approval ratings required multiple revisions of the plan, and dealers still found themselves irritated with the final version. There was a lengthy delay, refusal of noncompliant stores to accept General Motors’ buyout plan, and difficulties ensuring eligible shops adhered to the plan’s high standards of service.

Cadillac now says it will weigh customer satisfaction scores and compliance with brand standards more than actual sales volumes when determining U.S. dealer bonuses for 2018. The reason for this comes down to so many dealerships not meeting this year’s sales targets. That’s good news for those smaller outlets that were upset with Pinnacle to begin with.

According to Automotive News, Cadillac head Johan de Nysschen attributed the unmet sales goals to the brand’s sedan-heavy lineup and unwillingness to employ aggressive incentives. Sport-utility vehicles and crossovers are performing rather well, especially among luxury nameplates, but they’ve forced sedans to forfeit a portion of the overall market.

“They sold fewer cars than in the prior year, but on top of that, by not qualifying for the sales bonuses, many of them also made less profit on each car they sold,” de Nysschen said in ant interview.

The automaker told dealers about the changes at the start of this week as de Nysschen stressed the importance of transforming the network into a more premium chain. “It’s an important improvement and one that reflects the spirit of what we’re trying to achieve, by saying that dealers who perform need to be in the money,” he explained. “I absolutely believe that dealer profitability is a precursor and an essential requirement for a strong franchise, and a strong franchise is necessary for Cadillac to be strong. Pinnacle’s objective is to make dealers more profitable — provided they perform.”

De Nysschen said he understands that sales volumes aren’t entirely dependent upon a store’s performance, which is one reason why Cadillac is stressing project compliance over volume for the 2018 bonuses. However, the company needs both to rationalize the $800 million investment that is Project Pinnacle.

To solve the problems associated with its lineup, Cadillac plans to launch a compact luxury crossover later next year. Called the XT4, the upcoming model will slide in below the XT5 in terms of price and sizing, helping to make the brand’s fleet more competitive. More entries will follow over the following two years, resulting in a Cadillac where crossovers and SUVs greatly outnumber sedans.

Through November of this year, the brand’s U.S. sales are down 5 percent overall and 7.8 percent on a retail basis. De Nysschen said he expected the decline but didn’t anticipate lessened demand across the luxury market. However, the brand is not comfortable offering large incentives to boost sales at the expense of overall profitability.

“To use a metaphor, making the goose not only alive but vibrant and strong is far more important than losing a couple of eggs along the way,” de Nysschen said. “Losing a couple of eggs means walking away from bad business and seeing the impact on the sales scoreboard. It was anticipated, but it doesn’t make it any more comfortable when that anticipation turns into reality.”

[Image: General Motors]

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  • Ryanwm80 Ryanwm80 on Dec 07, 2017

    Bonuses are based on customer satisfaction scores, but customers would have a different level of service based on the tier of their dealership, so I would expect the dealer in Newport Beach to have a higher rating than the dealer in Des Moines, because Project Pinnacle doesn't allow the dealer in Des Moines to offer the same level of service to their customers because ... it's a smaller town? Then again, I have to think the customers in Newport Beach have a higher expectation of service, and might score their dealership lower than customers in Des Moines. How would a customer in Des Moines know they're not getting the same level of experience as a customer in Newport Beach? The dealer in Des Moines could score just as well, or better than the dealer in Newport Beach in spite of much lower sales, but wasn't Project Pinnacle supposed to allocate perks based on volume, effectively preventing a smaller dealer with higher scores from ever getting a higher bonus?

  • CincyDavid CincyDavid on Dec 07, 2017

    Back in the 80s, John Molloy wrote the "Dress for Success" book. I seem to recall a blurb in there about different expectations for different markets. For instance, a dealer with an affluent clientele might dress in golf shirts and whatnot because a Cadillac is something the customers buy periodically, just like a refrigerator and you want the staff at the dealership to look like their country club buddies. Conversely, a store with a less affluent clientele should dress up, and make it more of a "special occasion"...perhaps these buyers have scrimped and save their whole lives to finally step up to a Cadillac. Different clienteles respond differently...and have different expectations.

  • Wjtinfwb Over the years I've owned 3, one LH (a Concorde) a Gen 1 300 and a Gen 2 300C "John Varvatos". The Concorde was a very nice car for the time with immense room inside and decent power from the DOHC 3.5L. But quality was awful, it spent more time in the shop than the driveway. It gave way to a Gen 1 300, OK but the V6 was underwhelming in this car compared to the Concorde but did it's job. The Gen 1's letdown was the awful interior with acres of plastic, leather that did it's best imitation of vinyl and a featureless dashboard that looked lifted from a cheaper car. My last one was a '14 300C John Varvatos with the Pentastar. Great car, sufficient power and exceptional highway mileage. The interior was much better than the original as well. It was felled by a defective instrument cluster that took over 90 days to fix and was ultimately lemon law' d back to FCA. I'd love one of the 392 powered final edition 300s but understand they're already sold out and if I had an extra 60k available, would likely choose a CPO BMW 540i for comparable money.
  • Dukeisduke Thanks Cary. Folks need to make sure they buy the correct antifreeze, since there are some many OEM-specific ones out there (Dex-Cool, Ford gold, Toyota red and pink, etc.).And sorry to hear about your family situation - my wife and I have been dealing with her 88-yo mom, moving her into independent senior living, selling her house, etc. It's a lot to deal with.
  • FreedMike Always lusted after that first-gen 300 - particularly the "Heritage Edition," which had special 300 badging and a translucent plastic steering wheel (ala the '50s and '60s "letter cars").
  • Dave M. Although the effective takeover by Daimler is pooped upon, this is one they got right. I wasn't a fan of the LHs, mostly due to reported mechanical, NVH and build quality issues, but I though Chrysler hit it out of the park with the LXs. The other hyped release that year was the Ford Five Hundred, which, while a well-built car with superior interior space, couldn't hold a candle to the 300.
  • Art Vandelay I always liked those last FWD 300's. Been ages since I've seen one on the road though. Lots of time in the RWD ones as rentals. No complaints whatsoever.
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