Cadillac Wants To Dump Dealers: Offers $500,000 To Drop Brand
It’s 2020 after all, so the wacky has just become common. Take Cadillac, for instance. It is so high on the electric future it is preparing for that it has challenged its 880 dealers. If you don’t want in on the electric future that will be Cadillac it will buy you out. Be gone with ya! Cadillac wants to drop dealers not in sync with its EV plans and it is offering those dealers $500,000 to drop the brand right now.
Some dealers are balking at the future Cadillac has in store for them. Its first EV, the Lyriq, will hit the dealer’s showrooms in 2022. By 2030 it plans on having a totally electric portfolio. That means infrastructure for these electronic dreams. Cadillac expects its dealers to fork over $200,000 for chargers, tooling, training, and more. And Cadillac is saying November 30 is the deadline to fish or cut bait.
“We wanted to move fast and make sure dealers are ready for the acceleration”
“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. “This is purely an option for those dealers who feel the EV journey is not suitable for them.”
This culling of dealerships is nothing new for Cadillac. Back in 2016 former Cadillac president Johan de Nysschen proclaimed that Cadillac had “too many dealers.” Cadillac offered an undisclosed sum to its 400 underperforming dealers to help it hollow out its ability to sell a brand of automobile viewed as out of touch. Now, this latest Cadillac offer to split from the Caddy crest is open to all of its dealers.
“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. That “EV journey” is fraught with some hand wringing and consternation. At least if you’re a dealer.
Those dealers choosing to split can sell Cadillacs through 2021
Those dealers choosing to split can sell Cadillacs through 2021. They will also have access to Cadillac’s used vehicle auctions through 2024. There are some dealers who, feeling unloved after all of these years, look to the offer as a blessing.
If a dealer is selling only a few Cadillacs a month the offer of up to half-a-mil might be all the money for them. That’s how much they may profit over the course of years-maybe even decades. So it is an attractive bailout.
“Particularly after some negotiation, General Motors generally has been willing to raise their initial offer,” said Shawn Mercer, partner at Bass Sox Mercer law firm in Tallahassee, Fla. “Enough money is being offered that it is clearly getting the attention of a lot of the smaller dealers.”
The latest Cadillac offers “appear to be much more aggressive
The latest offers “appear to be much more aggressive. It signals GM’s commitment to reducing the dealer count,” Mercer said. “However, it is still voluntary. And dealers that have turned down the offer, there have not been any ill feelings or negative consequences.”
Many dealers see more costs related to taking on EVs than the $200-300,000 Cadillac estimates each dealer will need to spend to upgrade. “I will have to rewrite the business plan for the store to be profitable,” said a Virginia dealer to Automotive News. The dealer already committed to making the investments GM is requiring and thus didn’t get a formal buyout offer.
It’s a whole new world out there. Some dealers are willing to gamble while others see the end of an era. But the one thing going for Cadillac is that the fewer dealers there are the more exclusive the brand becomes. And for dealers, there is more demand from fewer sources, so it’s a potential profit maker bigger than in previous decades.