Under Fire: GM targeting metropolitan Cadillac dealers for closure?
Cadillac is one of the core brands that will form the new General Motors, but the dealership network can't continue in its current guise, according to GM sales head Mark LaNeve. There are 1,422 Cadillac dealers nationwide, more than four times the number of Mercedes-Benz dealers and more than six times the number of Lexus dealers. That kind of saturation meant that in 2008, the average Cadillac dealership did one-sixth the business of a Mercedes dealer and one-tenth the business of a Lexus dealer.
To be fair, Cadillac has fewer cars on offer than Mercedes, BMW, or Lexus. Still, GM wants to gets its dealer volume numbers closer that of the competition – proportionally speaking – and that means more dealer closings. GM hasn't said how many, but to even get close to retail parity they'd be looking at many hundreds of closures, with many of them likely to be in metropolitan areas. Whenever those dealers are chosen, as with the others, they will be allowed to remain open until their franchise agreements on October 31, 2010.
[Source: Automotive News - Sub. Req.]
Reader Comments (Page 1 of 1)
JZeke 10:12AM (6/09/2009)
If that kind of disparity doesn't speak volumes, I don't know what else does.
I'd like to see Cadillac as an exclusive brand again, and diminishing its retail presence will certainly help.
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Motor_Yakuza 10:18AM (6/09/2009)
Yeah, with GM canceling cars like the next gen XLR it will take a wile.
Tool 1:00PM (6/09/2009)
I think if Cadillac really took on the mantle "Standard of the World" again, these decisions would become aligned with that brand promise. Very powerful.
Much like BMW is the Ultimate Driving Machine, Lexus is Pursuing Perfection, and Mercedes is Engineered Like No Other Car in the World, Cadillac reasserting itself as the standard would make all the difference.
If Cadillac was the standard of the world, and acted like it (like BMW, Lexus and Mercedes live up to their brand promise more often than not) it wouldn't have strayed and made all these mistakes. i.e. Cimarron.
Motor_Yakuza 10:17AM (6/09/2009)
So? Cadillac is home, compare the number of Lexus dealers in Japan or the Merc Dealers in Germany with the Cadillac dealers in Japan or Germany.
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Alex 10:38AM (6/09/2009)
I think you are missing the point. Yes, German has many more MB dealers than Caddy but MB has the market share in Germany to warrant the number of dealers. In the US, Cadillac has too many dealerships in relation to the number of cars they are selling.
geo.stewart 12:07PM (6/09/2009)
better benchmark may be volume in respective markets, but lets concentrate on US market.
Cadillac consistently falls between Mercedes (high end) and Audi (low end) in volume sales; with BMW and lexus at the top and Infiniti at the bottom.
I agree with the other statements, look at local sales, consolidate with an eye for where your market is at and upscale the dealer experience. Really funny 2 1/2 men last night made a dig at teh difference between the Mercedes experience and the 'domestic' dealer experience. How great is your experience when you get the Cadillac serviced and you are sitting in some back room of your Chevrolet dealer with a soda machine, as opposed to some dealers that have a SBUX wannabe inside.
Al Beck 10:19AM (6/09/2009)
It really depends on where they make the cuts. Chrysler's recent cuts were guided by no market sense; my metropolitan area (250,000 people) will not have a single Chrysler/Dodge/Jeep dealer. The nearest dealer will be about an hour commute for most of these people.
Having said that, it seems that GM has a better handle on how to go about making their dealer cuts and where those cuts need to be made. But aren't a lot of these Cadillac dealers paired with Buick/GMC? Are they just going to cut the Cadillac line, or is the dealer going to get the ax?
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BoxerFanatic 11:08AM (6/09/2009)
that sort of non-sense is why they FAIL.
They haven't made sense in their decisions before, they don't currently, and there is no reason to think that may change.
Under government guidance, which some say the government was more in control of choosing chrysler dealers to close than Chrysler was...
There used to be market forces at work.
Dealers don't cost the parent company much, if not make them money through franchise fees. Dealers buy cars and parts up-front, and then finance to sell them, GM doesn't own dealer inventory, so it has no carrying costs for GM.
It is GM's decision to manage production levels based on orders. It is dealers' responsibility to order in accordance with demand in the marketplace.
If a dealer doesn't make money, the market puts them down.
GM, or Chrysler, or any other parent company of franchises like that, all they do is artificially limit access to their product... which for an organization trying to recover, limiting access is the WRONG move.
Comparing to other companies is not necessarily an accurate metric. The measure should be whether the product sells, or has the potential to sell well enough to support the number of dealerships that there are.
If not, then give dealers the option to not renew before going bankrupt themselves, under excessive inventory costs.
But economics and business practices are not in the equation of Government Motors.
Lemon 11:48AM (6/09/2009)
BoxerFanatic,
I wonder if the reason that GM is closing dealers is because some dealers give GM a bad reputation. I've heard people complain about quality issues with their GM vehicles when the problem really lies in the dealer's customer service practices. Sure, there may be no direct cost for GM to have a certain dealer, but the indirect impact on their reputation may be the reason for the closings. Just a thought
BoxerFanatic 12:51PM (6/09/2009)
@lemon,
That may be partially true...
But rather than hacking away at their distribution chain, why not actually have a corporate rating system for their branded dealerships, with customer input.
Shame bad dealers into either shaping up, or at least letting customers know which dealers are good or bad. If the ratings are perennially bad, that could be illustrative grounds for non-renewal of franchise agreements.
Otherwise it is throwing the wheat out with the chaff, with no discernable reason behind it.
Avinash machado 11:09AM (6/09/2009)
Why not merge the Cadillac and BPG dealers? With Pontiac going away dealers will have lesser volumes to sell. They might as well sell Cadillac luxury cars alongside GMC trucks and Entry luxury Buick cars.
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Mark R 11:39AM (6/09/2009)
I have to disagree about putting Caddy with Buick/GMC. I would think that GM would want to create a "special" buying experience for the Caddy customer, in order to upgrade to the level of MB or Lexus.
garlinski 11:41AM (6/09/2009)
Speaking of Cadillac... http://www.timesleader.com/news/GM_taking_its_brands_away_from_MotorWorld_06-09-2009.html
This dealer is losing their Cadillac franchise as well. Pontiac, Buick, Caddy and GMC! Then again, they sell 14 different brands on one property.
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Toledo Guy 12:23PM (6/09/2009)
It's because they sell 14 brands on one property that GM is pulling the franchises. Chrysler did the same thing, those who shared buildings with competitors were heavy on the list of losers.
Cadillac is probably trying to move towards the Lexus model. Here in Toledo, there are 5 Caddy dealers within 30 miles of me. There's one Lexus dealer. And they moved down the street into a much larger facility about 3 years ago. They move a lot of Lexus metal in a UAW town....
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Fyrewerx 12:51PM (6/09/2009)
Here's the part I can't figure out -- if GM is getting rid of so many dealers, it does three things in the market:
1. The competition within a brand goes away. Dealers don't have to discount the car as much, especially if the buyer has settled on a particular brand/model.
2. Some folks will start to look at the other brands that may be more convenient in their area. If I have to drive 20 - 30 miles to get to a Caddy dealer, and there's a Lexus dealer within a mile, guess where I'm going to stop first?
3. Getting after purchase service will be worse than it was before. Now, you will be in line with all the other folks who bought the same brand and have fewer choices of dealers to take the car to for service. The brands that had fewer dealers in the first place already deal with that, so it just means the GM dealers are losing any advantage they had when extolling the great service (yeah, right).
I don't see how less dealers is helping GM and Chrysler. They don't pay the dealers for selling and servicing cars -- the dealers were paying GM and Chrysler for product. And think about the folks who are now out of a job because of the dealership cuts -- are they likely to go buy a GM or Chrysler product???? (that is if they ever find another job)
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#1Dave 4:15PM (6/09/2009)
I am wondering if it has to do with GM’s financing. If perhaps, a higher number of defaults came from certain dealers, those dealers might happen to be mostly located in metropolitan areas ( just maybe). Buy closing those dealers with a high default rate- GM would gradually improve their actual accounts receivable and therefore the cash position of the company over time. That at least sounds plausible, to me anyway.
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Anti Massey Cadillac of Sanford 8:12AM (6/24/2009)
I vote to eliminate Massey Cadillac Of Sanford in Sanford Florida. I heard of bad dealerships but this is The WORST dealership I have ever done business with. Full of Racially motivated small-minded personnel and with a showroom not worth selling even the BMX Bicycles. I've seen better-looking Chevy dealerships. And not only that, their sales force are white collar thieves pulling all sorts of scams during the purchase process, in particular James Capps and Joel Elmore.
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