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Automotive News - Cadillac Dealers feel the Heat

De Nysschen wants dealers to turn the Cadillac showroom experience into a competitive advantage.

Automotive News – Cadillac Dealers feel the Heat

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Claude Burns has heard new Cadillac president Johan de Nysschen say that dealers will need to “step up” to help him execute his long-term growth plan. Burns, whose Chevrolet-Cadillac store in Rock Hill, S.C., sells far more Chevys than Cadillacs, isn’t quite sure what that means. But he has a guess — and it has prompted him to draft plans to build a separate Cadillac showroom. “If I don’t do a better job with Cadillac and start offering customers a true luxury experience, I think he could make life uncomfortable for me,” says Burns, who averages fewer than 10 new Cadillac sales a month. Dealer response to the arrival of de Nysschen, the former lnfiniti and Audi chief, and to his recent comments about his vision for Cadillac’s retail network, runs the gamut. Many retailers are like Burns, who says he “drank the Kool-Aid” during a dealer meeting with de Nysschen and other top General Motors executives last month in Las Vegas. He left inspired by promises of an abundance of product and a management philosophy that preaches product exclusivity. But others, especially lower-volume Cadillac dealers, are worried. They fear that de Nysschen wants to consolidate Cadillac’s network of 924 dealerships and reshape it in the mold of BMW or Mercedes-Benz, which have two-thirds fewer stores, mostly in urban locales, and outsell the average Cadillac store by nearly 5-to-1.

One Midwest Cadillac dealer who returned from the Vegas gathering wasn’t in the mood to draw up expansion plans. Instead he called Richard Sox, a Florida lawyer who represented many Cadillac dealers targeted for termination around the time of GM’s bankruptcy in 2009. Sox said the dealer, whom he declined to name, is on the outskirts of a large urban area and must compete against several bigger Cadillac stores. “He feels like there’s a good likelihood that he’ll be targeted as Cadillac looks to reduce its dealer count,” Sox says. So far, de Nysschen has issued no orders that would require a dealer such as Burns to build a new showroom. About half of Cadillac’s dealerships have remodeled in recent years under a broader GM facility program. Another 35 percent have projects planned or underway. Despite media reports that de Nysschen wants a smaller dealer body, the Cadillac boss told dealers that he thinks the brand’s larger network can be an asset, and assured retailers that he wasn’t out to eliminate stores, according to people who attended the Las Vegas meeting.

He told Automotive News last month that he will “be asking our dealers to step up to the plate” to make the Cadillac showroom experience a competitive edge and help position the brand “at the very top of the premium sector.” “It’s very clear to me that many, many dealers already have risen to the challenge,” he said. “On the other hand, when those customers engage us in our dealerships, we cannot afford that the experience is anything other than confirming that this is a first-class brand. And not all of our dealers are there.”

Cadillac spokesman David Caldwell says there are no plans to change the dealership network’s size or makeup. “All of the work going on now is around the idea of raising everybody’s level of performance,” he says. Howard Drake, chairman of the Cadillac National Dealer Council and owner of Casa de Cadillac in Sherman Oaks, Calif., says Cadillac has been “emphatic that there is no wind-down plan for its dealers.” He says the council is lobbying for a system that would “reward brand-building behavior with greater dealer margin,” similar to the practice of other luxury brands. Tim Holm, who runs a Chevrolet-Buick-Cadillac store in Abilene, Kan., sold 36 new Cadillacs last year, mostly SRX crossovers and XTS sedans. He hasn’t heard de Nysschen’s vision firsthand, but worries that it won’t favor smaller, rural dealers. “It’s fair to say there’s some angst over what the future holds for those of us who sell less than 50 Cadillacs a year,” Holm says.

Burns, too, figures he could be “in the cross hairs” if Cadillac wants fewer dealers. His store is on the outskirts of Charlotte, N.C., where there are a half dozen Cadillac dealerships. He views his separate showroom plans as a pre-emptive strike to show that he’s buying into de Nysschen’s vision.

“I’ve wanted to make Cadillac a bigger part of my business for a while, but I couldn’t see doing that with three or four models to sell,” he says. But after seeing de Nysschen parade out a slew of future vehicles for dealers in Vegas, “it appears to me that GM is serious about making Cadillac a contender.” De Nysschen should win more converts if he follows through on his vow to deliver hit vehicles and revitalize the faded brand, says IHS senior analyst Tom Libby. He believes Cadillac’s dealer count will shrink, but only after de Nysschen has earned the leverage to ask dealers for a bigger investment. “That will allow him to sit down and pitch to dealers: ‘This is what we’re doing,”‘ Libby says, “‘and now this is what we’d like you to do as our partner.”‘