Cadillac puts final touches on retail overhaul

Cadillac's relationship with its dealers is about to get the equivalent of an engine rebuild.

Cadillac President Johan de Nysschen is putting the finishing touches on Project Pinnacle, a program that will overhaul everything from how dealerships interact with customers and how their salespeople dress, to how they present their showrooms and service departments and how they get paid for new-car sales.

De Nysschen has scheduled several regional meetings for this month to brief dealers on the details of the broad plan he outlined early this year. Also this month, Cadillac will notify dealers of their individual sales targets, which will determine part of their compensation under the new program. The factory-set sales bogeys -- always a touchy subject -- will be especially sensitive given Cadillac's 12 percent U.S. sales slide this year through May.

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The Oct. 1 start of Project Pinnacle promises major implications for Cadillac's roughly 900 dealerships. Small and midsize stores must decide whether it's worth it to add dedicated salespeople or services for the promise of a bigger margin. For high-volume stores, maxing out the margins will require some heavy lifting, too -- they'll need to offer pickup and drop-off for sales and service customers, for example, according to a draft of the standards obtained by Automotive News.

Project Pinnacle dismantles a payment structure that all but ensured high-volume Cadillac stores more than $1 million annually in factory new-car money, replacing it with a system that requires them to jump through many more hoops. De Nysschen, who deployed a similar concept when he ran Audi of America, has said dealers will be able to earn more on new-car business under Project Pinnacle: Maximum margins amount to 14 percent of the sticker price, vs. about 12.6 percent under the current system.

Some dealers are skeptical. 

"I've crunched the numbers," said one high-volume Cadillac dealer in the Northeast. "They're asking us to take on a lot more overhead to make less money." 

Under Project Pinnacle, dealers will be paid bonus money for hitting sales and customer rating targets and certain certified-pre-owned levels. But they stand to earn the most extra dough by complying with a lengthy list of new brand standards. 

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To determine which standards dealers must meet and how much they'll be paid for adhering to them, each is assigned to a tier. Tier 1 dealers generally are the largest stores and will get paid the highest margin if they comply. Tier 5 dealers -- the smallest stores, which typically also have Chevrolet or Buick-GMC franchises -- essentially would become service centers and stop carrying inventory, though they could still sell new Cadillacs. 

Dealers can ascend to higher tiers for bigger payouts if they do what it takes to comply. 

Snell Motors Inc., a Buick-GMC-Cadillac dealer in Mankato, Minn., will probably try to jump up to Tier 2, which will require a roadside-assistance program among other new services, sales manager Jon Teeslink says. He's not worried about the required dress code, though. Staffers already wear suits and ties. 

"We think this will improve our level of customer service across the board," he said. "These are things we want to be doing anyway." 

Scott Allen, dealer principal at Crestview Cadillac in West Covina, Calif., near Los Angeles, doesn't think moving to Tier 1 from his assigned Tier 2 will require much heavy lifting. He might have to add some cellphone charging stations and start advertising his concierge service, which he already offers. The difference could mean more than $100,000 a year in extra payments from Cadillac, though, based on his annual sales. 

Others are more apprehensive. 

One Chevrolet-Cadillac dealer in the Northeast who would be in Tier 3 if he decides to participate says that jumping up to Tier 2 is a "nonstarter" because it would require him to offer roadside assistance. Even staying in Tier 3 would mean a new dress code and require his salespeople and service advisers to use tablets when working with customers. He's not sure those and other changes are worth it. 

"Right now I have Chevrolet salespeople serving Cadillac customers. I don't blame Cadillac for wanting to change that," said the dealer, who didn't want to be identified. "But for me it doesn't matter, because I don't need to sell one Cadillac to make a lot of money. I'm not sure what I'll decide."