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

Matt Posky
by Matt Posky

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]

Matt Posky
Matt Posky

A staunch consumer advocate tracking industry trends and regulation. Before joining TTAC, Matt spent a decade working for marketing and research firms based in NYC. Clients included several of the world’s largest automakers, global tire brands, and aftermarket part suppliers. Dissatisfied with the corporate world and resentful of having to wear suits everyday, he pivoted to writing about cars. Since then, that man has become an ardent supporter of the right-to-repair movement, been interviewed on the auto industry by national radio broadcasts, driven more rental cars than anyone ever should, participated in amateur rallying events, and received the requisite minimum training as sanctioned by the SCCA. Handy with a wrench, Matt grew up surrounded by Detroit auto workers and managed to get a pizza delivery job before he was legally eligible. He later found himself driving box trucks through Manhattan, guaranteeing future sympathy for actual truckers. He continues to conduct research pertaining to the automotive sector as an independent contractor and has since moved back to his native Michigan, closer to where the cars are born. A contrarian, Matt claims to prefer understeer — stating that front and all-wheel drive vehicles cater best to his driving style.

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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.

  • Tassos Jong-iL The Peninsula of One Korea.
  • Eric No, I just share my opinions. I have no use nor time for rhetoric from any side.
  • Redapple2 Jeez. This is simple. I 75 and 696 area. 1 nobody -NOBODY wants to work in downtown Detritus. 2 close to the tech ctr. Design and Engineering HQ. 20 miles closer to Milford.3 lower taxes for the employees. Lower taxes for Evil GM Vampire.4 2 major expressways give users more options to suburbs. Faster transport.Jeez.
  • Clark The Ring (Nürburgring) is the only race track I've driven on. That was 1985 or 1986 with my '73 Fiat Spider (and my not-so-happy girlfriend). So I made the Karussell (today: Caracciola Karussell, which I believe the author meant; there is another one: Kleines Karussell).
  • AZFelix This article takes me back to racing electric slot cars with friends on tracks laid out in the basement. Periodically your car would stop due to lost connections or from flying off the track and you would have to dash over to it and set it right. In the mean time your competitor would race ahead until faced with a similar problem. It seemed like you were struggling harder to keep from losing than trying to win. Fun times.“History never repeats itself, but it does often rhyme.” Mark Twain