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Cadillac Offers to Buy Out 400 of Its Dealerships

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Cadillac has more than 900 dealer franchises across the United States. That’s down from more than 1,400 before the end of 2008 when the recession hit, but still hundreds more than the German competition (Audi, BMW, and Mercedes-Benz), and the automaker believes it is spread too thin.

According to Automotive News, Cadillac is offering to buy out 400 of its smallest US dealerships—those that sold fewer than 50 new retail vehicles last year. They account for around 43% of the luxury brand’s total dealerships, yet only contribute nine percent of its total sales. Cadillac is offering to buy each of them out for anywhere between $100,000 and $180,000.

President Johan de Nysschen says Cadillac isn’t trying to cut the stores, but rather to give them an out should they not want to participate in the automaker’s new Project Pinnacle program. Revealed earlier this year and slated to go in effect in 2017, the program would give larger stores big incentives to add new services to their dealerships, with the goal being to improve the quality of the customer experience. Those that sell the most vehicles, or “Tier 1 stores,” would receive the biggest incentives for providing extra features like service pickups and concierge sales, while those that sell the least would be expected to give up stocking cars and instead direct customers to order vehicles through virtual showrooms.

Even though Cadillac says the program is completely optional, it has been controversial among dealers, some of which have called it unfair. This is why, in response, Cadillac is offering the 400 smallest stores yet another opportunity to opt out—albeit in a more drastic manner and in return for a decent sum.

Source: Automotive News (subscription required)