By on November 25, 2020

Cadillac dealers disinclined to spend a sackful of money on revamping their businesses to sell and service electric vehicles received some moderately good news this month. General Motors is willing to issue them fat stacks of cash for stores that cannot rationalize the sizable expense of installing charging stations, training staff, and retooling the garage.

While it smacks of the consolidation efforts headed by Caddy’s former President Johan de Nysschen in 2016 with Project Pinnacle, and makes us wonder how the brand plans on turning a profit if it keeps eliminating storefronts, GM thinks buying out dealers who don’t want to participate in the EV experience is the way to go. Though the company has expressed an interest in gradually embracing a more digitized sales model as Cadillac strives to become an exclusively electric brand by 2030.

“We wanted to move fast and make sure dealers are ready for the acceleration,” Mahmoud Samara, vice president of Cadillac North America, told Automotive News earlier this week. “This is purely an option for those dealers who feel the EV journey is not suitable for them.”

According to the outlet, many offers range from $300,000 to upward of $500,000. However, Cadillac has declined to give any official figures, and dealers who accepted the deal aren’t allowed to discuss the program publicly.

“We had discussions with all the dealers around what is our EV journey, how are we going to get there? It was a very open, transparent discussion — allowing all dealers to understand and buy in,” Samara said, noting that about 880 U.S. dealerships are currently eligible for the buyout. While she believes most will progress with Cadillac in its “EV journey,” low-volume dealerships may have no choice but to take the money and run.

From AN:

Many smaller dealers, after years of feeling like GM wanted them gone, are no longer as eager to stand firm as the costly shift to EVs looms, said Stuart McCallum, who leads the automotive consulting and accounting practice for Withum accounting firm in Princeton, N.J. Some just hope to negotiate a more lucrative deal before agreeing to give up their franchise, he said.

“They’re looking at this as a godsend almost,” McCallum said. “There is wiggle room in the offer. It’s not a take-it-or-leave-it.”

For dealers who sell few Cadillacs a month, he said, a $300,000 to $400,000 payment might be equal to five to 10 years’ worth of new-vehicle profit.

But larger storefronts might see things differently. Unless they negotiate a particularly sweet deal with GM, these aren’t favorable terms. Of course, if they believe spending $200,000 is too big a risk to take on the gamble that people will want Cadillac EVs in the years to come, there aren’t many alternatives. They have until the end of the month to make a decision and notify General Motors.

[Image: Lerner Vadim/Shutterstock]

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35 Comments on “GM is Paying Cadillac Dealers to Ditch the Brand...”

  • avatar

    “This is purely an option for those dealers who feel the EV journey is not suitable for them.”

    “We had discussions with all the dealers around what is our EV journey, how are we going to get there?”

    If they use the term “EV journey” one more time I may puke.

  • avatar

    “The EV journey.” Ha! Yeah, to oblivion.

  • avatar

    Actually there may be some 4D chess going on here. Cadillac, at least as of a few years ago, had 930 dealers including some still standalone. For contrast, Cadillac’s luxury competition aside from Lincoln typically have 300 dealers or less. In order to satisfy enough volume for 930 dealers to sell, you see volume intended models such as the ATS. Cost cutting, design flaws, and poor execution let to that model not succeeding in this effort. I argued at the time (about 2015), the brand needed to choose between volume models and being truly bespoke luxurious but they really couldn’t do both because of the large dealer network. I suggested then they missed an opportunity in 09/10 to cull more of the Cadillac dealers and then in 2016 JdN seems to have gotten the memo and floated a program intended to do this. Now the plan is back, but it is cloaked under the “get woke go broke” concept of total electrification. This is actually wise, because it allows GM to cut the number of USDM dealers while simultaneously allowing them to sell fewer models. I seriously doubt they will profit on, or even succeed with, Cadillac pure EVs but where they could succeed is with lesser volume higher profit ICE models. Maybe not quite Escala, but somewhere between today’s garbage and it. Whatever luxury EV volume does exist will be surely dominated by Tesla and I seriously doubt even in a very distant second place Cadillac can profit, but it may just be a distraction/compliance to the core business. Only time will tell if I am on the right track here.

    • 0 avatar

      …adding on: It’s worth stating that GM’s core business is perpetuating the careers of executive butt-clowns and C’srs, and nothing else.

    • 0 avatar

      Agreed. Caddy’s only path to success is to be exclusive, not selling parts bin cars with more brightwork. It doesn’t matter what propels those cars….

      The ATS would have been a great Pontiac halo car, had Pontiac lived, and for which it was intended. I drove an ATS-V for two days, and damn GM hit the sports sedan target in a bullseye….but they only made 14 of them and each dealer though it merited a 10k ADP sticker.

      The Cadillac way is to build em cheap and warranty the first owners very well, it’s cheaper than building them well, and reflected in resale values…the only car I’ve ever owned I had to pay to get rid of.

      • 0 avatar

        I love reading the “ATS/Alpha was intended as a Pontiac” line repeated on this site. It is like a dog whistle to indicate the person making the comment has no idea how the development process of a car line works. The Pontiac brand was dead and gone long before the ATS design was finalized. There is nothing that the average consumer would touch or see in an ATS that was designed when Pontiac was still around, even the crappy “gages”.

        You know what they say though, ignorance is bliss.

        BTW, I drove an ATS-V for 3 years and yes, it was a badass car. Especially on a track. Lightly used versions today are a hidden gem on the used market.

        • 0 avatar

          You’re right, it wouldn’t have sucked as badly as it did had it been a Pontiac.

          “I drove an ATS-V for 3 years and yes, it was a badass car.”

          Typical GM, sell the “Cadillac” Cadillac to a small percentage at great gain and the “Chevrolet” Cadillac to 80-90% of customers probably at a loss.

      • 0 avatar

        Zee Germans follow a similar strategy, although they seem to take into account the CPO period before their models self destruct. Their resale however typically fares better.

        “the only car I’ve ever owned I had to pay to get rid of.”

        Do tell.

    • 0 avatar

      Look at dealership landscape in 2030 or 2040. There won’t be many just there won’t be many gasoline stations on every corner.

      With the move to digital buying experience with home delivery/pickup for purchase and maintence, and recent touchless Covid-19 transactions, dealerships just won’t be needed to the extend they are today.

      Speaking of Cadillac Alpha platform:

      • 0 avatar

        “There won’t be many just there won’t be many gasoline stations on every corner.”

        Unless Peak Oil is real, this is incredibly disingenuous thinking.

        “dealerships just won’t be needed to the extend they are today.”

        Perhaps on the sales side, but someone will have to service the vehicles.

  • avatar

    If they were as smart as Tesla they’d only need one point per large metro area. Those rigs autonomously drive themselves to the service location and return back home after repairs. You can even program them to stop on the way back and get a complimentary dozen Krispy Kremes.

  • avatar
    SCE to AUX

    Interesting deal: “Sail with us to the New World (at risk of death by Indians, hurricanes, or scurvy), where you could become a wealthy plantation owner, or here’s some money to go back home to Genoa and open a bread shop.”

    What would you do? If I’m the Cadillac dealer, I’d take the money and open a Tesla store or a Rivian outlet. This is a gift.

    Here’s another idea: GM could spend $440 million and pay every Cadillac dealer to go away. It’s painful to watch them go through this constant reevaluation process.

    GM might get a big surprise if most dealers take the money.

    • 0 avatar

      I thought Tesla was all factory stores?

      • 0 avatar
        SCE to AUX

        They are.

        I guess I was thinking of standalone Cadillac store owners (which may not exist) defecting to Tesla, offering to manage a new outlet.

        But GM may tie a non-compete into the payoff, who knows.

        • 0 avatar
          el scotto

          @SCE to Aux; I can think of three stand-alone Cadillac dealers. Lockhart Cadillac in Greenwood and Fishers IN and Mooore Cadilac in chantilly VA. LOckhart used to have the Saturn dealership. Moore had the Humer dealership and still has the quasi quonset hut looking building. The stand alone Cadillac dealerships could be left overs from when Caddy was the “king of hill”. Perhaps the principle of an “automotive group” had his office there and hung out with his loud blazer wearing golfing/drinking/ women chasing buddies.

    • 0 avatar

      GM offered $120,000 to Cadillac dealerahips in 2016. Anything below a half million should be less than being sued by the dealership and the negative press that TTAC likes to drum up.

  • avatar

    GM has had an issue with too many dealerships as it is (all brands). Culling the herd, especially if half of these are low volume multi-make dealers that won’t feel the pain of pulling the plug, makes sense to me.

    If you’re a Cadillac-Buick-GMC dealer in flyover country and your clientele is mostly GMC buyers, I don’t know if that two Escalades you lease/sell a month is going to crush the bottom line. Bubba ain’t buyin’ no stinkin’ electric Cadillac.

    • 0 avatar

      Yeah but if that Buick GMC Cadillac dealer wants to sell the Hummer they’ll have much of the required investment included in the upgrades required for that. Both are going to require the dealers to install charging equipment and train technicians. Sure some of the training will be vehicle specific but much of it should be the same.

      So the technicial take EV’s 101 and depending on the dealer takes Hummer 201 and/or Lyric 201. The other thing that reduces the real cost is that you’ve got to regularly send your technicians in for training on the newest vehicles anyway.

  • avatar

    “at risk of death by Indians”

    Don’t be afraid of Indians, they are very peaceful people. Even though they occupied Bay Area they do not loot and burn our cities. Instead they start new companies and unlike those morons from Bureau of Land Management are most educated and prosperous immigrant community in America.

    So regarding topic – I would like to have Cadillac dealership.

  • avatar
    MRF 95 T-Bird

    Offering dealers to ditch the Cadillac brand. Does that mean they get put out to pasture at the Cimmaron ranch?
    My local Chevrolet-Buick-GMC dealer up until a decade ago was a Pontiac-Buick-GMC-Hummer-Saab franchise. It even had the Quonset hut like Hummer showroom. It’s now refashioned into a regular showroom. I wonder if they were offered incentives from GM or they were ok with it due to customer preferences.

  • avatar

    Well I think that GM is betting that a Biden administration will probably ban ice cars by 2024. Just being proactive.

    • 0 avatar

      Why wait until 2024?

    • 0 avatar

      That’s a lot of money to put on the line for such a silly bet.

      Truth be told, ICE vehicles will be slowly diminishing, and BEVs will slowly increase. The current market has too few electric vehicles to choose from, and the public is slow to change to a new technology. In five years or so, electrics will be more common in Everytown, USA. It will come down to which type of vehicle is more practical in normal use, and can be bought at a better price. If BEVs were at 18K right now, they would be selling like hotcakes.

      If every parking space had a charger, you could top off the batteries while running errands, never go to a gas station, and not have to worry about range anxiety. It’s just a matter of time, and our new President will have little to do with it.

      • 0 avatar

        Except that new Bolts are $19K on Autotrader right now. Let 28-cars tell how much they appreciate at the auctions.

        • 0 avatar

          Per Google: “MSRP: From $36,500”. So its a fire sale because GM cannot sell them. Whose surprised?

          “they appreciate at the auctions”

          That really doesn’t happen. If GM is really retailing those with incentives for that price, they are selling them at the factory sale for about the same or probably less. But if the new dealers are sitting on these and can’t move them without significant mfg incentive, I can’t see who would want to buy one at the factory sale.

      • 0 avatar

        “ICE vehicles will be slowly diminishing, and BEVs will slowly increase.”

        Short of some kind of miracle breakthrough, that’s not going to happen. If anything of the sort does occur, it will be diminishing production of both due to the quagmire the world is heading into.

    • 0 avatar
      el scotto

      @Dartdude Our Federal Government, thankfully, is not like Apple computer corporation. I have an iPhone 3 that I use for geeky stuff but to Apple Inc, it’s dead as a dodo. The federal government could, emphasis on could, try to ban all toasters; two slot, four slot and those abominations against the environment and the disadvantaged people, egregious six slot toasters. Every two years we get a chance to fire, not reelect, those who proclaimed “toasters are as burnt as stale bread”. Far too many people have perfectly fine working toasters and would refuse to go to toaster ovens or long handled forks to hold a piece of bread over a stove burner. People who own toasters also vote. “Give me Hamilton-Beach or give me death” or “Banning Black and Decker is a Black Mark against America”. The pro-toaster candidates would have such bumper sticker slogans. Same thing with ICE vehicles. Unlike my iPhone 3 which Apple, a corporation, made obsolete no is going to let an elected official declare their perfectly fine ICE vehicle obsolete. Automobile manufacturers would file lawsuit after lawsuit to prevent the federal government from banning the sales of their ICE cash cows. I can see EVs gaining in popularity with a couple having an EV S/CUV commuter beastie and an ICE vehicle. Now if the federal government would let me fully deduct the price of red Mustang GT convertible, I’d wildly approve that. Now if all the voter fraud people on here could show me how to pull that off.

      • 0 avatar

        Tucked into the Tax Bill passed in the recent times, deductions for autos went way up, purchased through a business…you no longer have to claim your Escalade is a farm vehicle-and you no longer have to lease “for the writeoff”….

  • avatar

    You don’t invest $27 billion for nothing!

    • 0 avatar

      redgolf, thank you for that link. Some eye-opening quotes there.

      “We want to lead in this space. We don’t just want to participate, we want to lead,” Doug Parks, GM executive vice president of global product development, purchasing and supply chain, said during a media briefing. “Tesla’s got a good jump and they’ve done great things. They’re formidable competitors … and there’s a lot of start-ups and everyone else invading this space. We’re not going to subside leadership there.”

      “We’re committed to fighting for EV market share until we are No. 1 in North America,” [Mary Barra] said Thursday during a virtual Barclays automotive conference. “Achieving margins similar, or to, or higher than our (internal combustion engine) business.”

      “EVs are core to creating GM shareholder value,” she said, later adding the company has assets that start-ups “will struggle to match.”

      So GM leadership is now convinced they are about to rocket ahead of the competition in a market segment where they are currently trailing. I’m pretty sure that when this situation has occurred in the past, GM was quickly shown to be absolutely correct. /S

      [Note also the schedule pull-aheads.]

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