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GM sees room to consolidate luxury dealerships

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GM sees room to consolidate luxury dealerships

Saturday February 9, 11:31 pm ET

By Kevin Krolicki

SAN FRANCISCO (Reuters) - General Motors Corp (NYSE:GM - News) will step up consolidation of dealerships handling its three luxury brands in a bid to shore up profitability, the automaker's chief executive said on Saturday.

GM Chief Executive Rick Wagoner said the top U.S. automaker had made progress in helping to steer mergers of dealerships offering its Buick, Pontiac and GMC brands but needed to do the same now to restructure the retail network for its Cadillac, Hummer and Saab brands.

"We want to run a little harder at our luxury side," Wagoner told reporters on the sidelines of the annual convention for U.S. auto dealers.

All three Detroit-based automakers have grappled with the problem of how to reduce the number of their franchised dealers in recent years as they cut labor costs and slower-selling models in the face of slack sales and declining market share.

GM has also faced some criticism for running too many separate and partly overlapping product lines with its current stable of eight brands, including Chevrolet and Saturn.

But Wagoner said that rather than reduce the number of those brands, GM was focused on restructuring its retail sales network around them.

For example, GM has set a goal of selling 80 percent of its Buick, Pontiac and GMC vehicles through stores handling all three brands this year. Wagoner said GM was just at the beginning of a similar consolidation for its luxury brands.

"Where we have a lot of stand-alone stores for Saab and Hummer, we think it will make sense to move," he told reporters.

Analysts have warned that U.S. car makers need to cut U.S. dealerships -- particularly in crowded city markets -- in order to drive more sales through remaining stores and free up funds for advertising and new investment.

In a related move, at the San Francisco-based convention of the National Automobile Dealers Association privately held Chrysler LLC briefed its dealers on its own plans to shrink its retail outlets and shed vehicles from its line-up that compete against each other.

Although the Detroit automakers moved quickly to slash labor costs for 180,000 U.S. factory workers under a landmark contract negotiated last year, progress in restructuring their retail networks has been slower.

Weaker dealerships are typically family-owned businesses where the owners have to be enticed to sell out by a one-time payout to sever their ties to the brand, executives have said.

GM has cut over 600 affiliated dealers over the several years, including some 260 last year, which took its U.S. dealer count to about 6,750 outlets at the start of 2008.

But Wagoner also noted GM's ongoing overhaul of the Buick, Pontiac and GMC sales network has taken about five years and said moving too quickly to shed stores also carried risks.

"If you try to push it too hard you're going to get dealers nervous and not focused on what you want them to focus on and it's going to cost a lot more money," he said.

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Good idea, poor execution. Cadillac should be exclusive or just paired with HUMMER (HUMMER was initially offered only to Cadillac dealerships). SAAB and Saturn should be paired up. With Saturn's transition to Euro-style vehicles, it would be the perfect compliment for SAAB. Both brands could benefit by having a Scandinavean dealership design theme with clean, modern, European decor.

SAAB and Cadillac have nothing in common.

Cadillac dealerships selling HUMMER already have exclusive showrooms, and that should continue. One dealership, two showrooms separated by the service department.

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SAAB and Cadillac have nothing in common.

IMO that is the reason why they are being paired. No cannibalization, Saab moving slightly upscale without stepping on Cadillac's toes, and basically having a single global (note my emphasis on the word 'global') premium channel.

Edited by ZL-1
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GM has no choice, really.

They bamboozled a bunch of dealers into building Hummer 'Quonset Huts' & face another loss of volume this year--Saab will sell less as well...why not give either of these a Cadillac pairing---although they don't have direct prodcuct overlap. they have pricing issues

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Not news. Saturn/Saab have always been paired here. So have P-B-GMC. Seems like your northern neighbors are ahead of the times (again.) Cadillac is 'free-flowing,' but has most often been postioned with P-B-GMC stores up here.

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IMO that is the reason why they are being paired. No cannibalization, Saab moving slightly upscale without stepping on Cadillac's toes, and basically having a single global (note my emphasis on the word 'global') premium channel.

In those regards, yes, but I'm speaking from a marketing standpoint: Saturn and SAAB could conceivably share a showroom. The decor for the brands are very complimentary. Put a SAAB in a "Sharper Image" Cadillac showroom and it will look a bit out of place.

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Not news. Saturn/Saab have always been paired here. So have P-B-GMC. Seems like your northern neighbors are ahead of the times (again.) Cadillac is 'free-flowing,' but has most often been postioned with P-B-GMC stores up here.

Wait, now. Don't get too smug. :P

Quantrell Cadillac/Saab/Hummer/Saturn (where we got our Aura; they also sell Volvos, as well) in Lexington, KY are just as ahead of the times as you are. That, and most every single Buick dealership in central part of this state has always sold GMC and Pontiac vehicles on the same lot. The only one I can really think of that doesn't currently would be Glenn Buick-GMC in Lexington, but they are just short of selling a few new Pontiacs to be up to date.

Edited by YellowJacket894
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Speaking of multi-line GM dealers, I know of a Chevrolet Pontiac Buick Cadillac GMC dealer (they used to have Oldsmobile also when I lived in the area).

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In an ideal world, none of these brands would need to be paired up. As much as it can be, Caddilac should be stand alone and that includes dealerships. But, if you have to put something with it, I guess Hummer is the best option. But Saab just doesn't belong. But that doesn't mean it belongs with Saturn any better. In fact, no matter how I think about GM's brand structure, Saab just doesn't seem to fit in the US.

Seriously, can someone please explain it to me?

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Speaking of multi-line GM dealers, I know of a Chevrolet Pontiac Buick Cadillac GMC dealer (they used to have Oldsmobile also when I lived in the area).

At Rydell in Grand Forks, ND they sell Chevy Cadillac Pontiac Buick GMC and Saturn. They were supposed to het a Hummer dealer but it didn't go through since there is already one in Fargo and Grand Forks is less than half the size. I would love to see them add Saab up there. As far as I know, there isn't a Saab dealer in ND which would make Minneapolis the closest.

Consolidating these dealerships makes good sense to me. Hummer and Cadillac appeal to the same buyers in a few cases and if Saab is going to start getting better product with the 9-4 and the re-done 9-5 and 9-3, I think they could fit on the same lot as Cadillac. I think Saab would look good in a classy Cadillac showroom as well.

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Seriously, can someone please explain it to me?

Pulling out is not worth it for the dealership buyouts and "badwill" it would generate among the fanatically-devoted SAAB fans.

SAAB looks like it will have a competitive lineup with a few additions in the next couple years, and to be quite honest, none of their current offerings suck. The 9-5 is average, but it is also ancient. The 9-3 lineup is phenomenally good. The 9-7X is the best of the GMT-360s. If SAAB can get a crossover (one is planned) and a smaller vehicle, then the lineup will be competitive. The 9-5 is scheduled for a redesign soon anyway, yes?

SAAB is an "opportunity" brand and I think if SAAB and Saturn dealerships were paired up, the pairing would benefit both brands by expanding their markets. SAAB just has a terrible dealer presence, so you can't blame them for pretty low sales.

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Pulling out is not worth it for the dealership buyouts and "badwill" it would generate among the fanatically-devoted SAAB fans.

SAAB looks like it will have a competitive lineup with a few additions in the next couple years, and to be quite honest, none of their current offerings suck. The 9-5 is average, but it is also ancient. The 9-3 lineup is phenomenally good. The 9-7X is the best of the GMT-360s. If SAAB can get a crossover (one is planned) and a smaller vehicle, then the lineup will be competitive. The 9-5 is scheduled for a redesign soon anyway, yes?

SAAB is an "opportunity" brand and I think if SAAB and Saturn dealerships were paired up, the pairing would benefit both brands by expanding their markets. SAAB just has a terrible dealer presence, so you can't blame them for pretty low sales.

SAAB is the weak sister of Euro-brands, period.

They've been running in circles (w/same volume) since GM's acquisition, with nothing to show for it but big bills & mediocre product overall (9-7=Joke, 9-5=geezer, 9-3=World's Nicest Vectra). Don't believe me? Check the residuals on ANY of their products to gauge true demand in the real world...

Saab is part of the reason that Caddy hasn't been internationalized. Saab is one of the reasons that GM's car lineup has holes in it. Saab is a distraction, for a company that can't afford more of them.

Pair them with whomever you want, a dealer can't make it selling solely Saabs regardless...it's a mess, an expensive one that has cost Buick, Caddy & Pontiac dearly in attention and product.

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The new Saab-Hummer-Cadillac here in Pittsburgh is very nice. It's all in one building with 3 different "faces" angling away from each other but connected in back via a common "service and delivery" area.

The Cadillac store is all glass and stainless steel. Very modern, very chic. It has giant.. and I mean large enough to drive a lifted Escalade through, set dual sliding glass doors that woosh open in a Star Trek like fashion as you walk up to them. It's relatively small inside compared to most of the mega dealers you see, but easily the classiest I've been in.

The Saab store is like walking into Sweden. It's basically an IKEA catalog store. Very attractive if that's your thing... and for most Saab customers, I expect it is.

The Hummer store looks ruggadized and old school industrial. I've never bothered to go inside, but there is a pile of rocks out front with a Hummer parked with one or two wheels on it.

In the center of the building is a delivery and quick service area. It's open, airy, and glassy. Lots of natural light. The few times I've been in there it has been positively spotless. There is nearly always a car sitting in there waiting for it's new owners.

Each of the individual stores feels small... like a boutique. I'm sure that is on purpose.

Overall, if GM replicates this setup country wide, I'm sure they will do well.

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In those regards, yes, but I'm speaking from a marketing standpoint: Saturn and SAAB could conceivably share a showroom. The decor for the brands are very complimentary. Put a SAAB in a "Sharper Image" Cadillac showroom and it will look a bit out of place.

Depends on how one defines showroom. 3 separate areas with different themes will work out fine, or we can even have the same dealer with different locations for each brand and a common service point. My dealer here in Lisbon works that way: 1 location for MINI, 1 location for BMW, 1 common service location.

There are many ways to skin a cat :AH-HA_wink:

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I like it, we bought our Pontiac from a B-P-G dealership. Not only did it make cross shopping GM easier, but it also have the appearance of a bigger selection of GM product. It also allows those who buy GM but have more then one GM brand the ability to buy/service at one dealer v. 2.

It also means that none have to be a full line brand, so GMC can keep working on trucks, Pontiac on going fast, and Buick on being Cadillac-lite. No more 4 cyl FWD economy Buicks or (soon) Pontiac SUVs.

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Here in the suburbs of Baltimore, I've seen some rather strange pairings, such as:

Cadillac-Pontiac-GMC, with Chevrolet-Buick right across the street

Chevrolet-Cadillac in another suburb

Besides those, I've seen a Chevy-Dodge lot and a Chevy-Mitsubishi lot with the same dealer. But anyway...

I agree with Cros when he said to pair Saab and Saturn due to their Euro roots, with one being mainstream and one being upscale. Cadillac and Hummer make sense since neither of those will bump heads. P-B-G is in place, and Chevy is big enough to be on its own without help.

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Good idea, poor execution. Cadillac should be exclusive or just paired with HUMMER (HUMMER was initially offered only to Cadillac dealerships). SAAB and Saturn should be paired up. With Saturn's transition to Euro-style vehicles, it would be the perfect compliment for SAAB. Both brands could benefit by having a Scandinavean dealership design theme with clean, modern, European decor.

SAAB and Cadillac have nothing in common.

Cadillac dealerships selling HUMMER already have exclusive showrooms, and that should continue. One dealership, two showrooms separated by the service department.

:yes:

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The new Saab-Hummer-Cadillac here in Pittsburgh is very nice. It's all in one building with 3 different "faces" angling away from each other but connected in back via a common "service and delivery" area.

The Cadillac store is all glass and stainless steel. Very modern, very chic. It has giant.. and I mean large enough to drive a lifted Escalade through, set dual sliding glass doors that woosh open in a Star Trek like fashion as you walk up to them. It's relatively small inside compared to most of the mega dealers you see, but easily the classiest I've been in.

The Saab store is like walking into Sweden. It's basically an IKEA catalog store. Very attractive if that's your thing... and for most Saab customers, I expect it is.

The Hummer store looks ruggadized and old school industrial. I've never bothered to go inside, but there is a pile of rocks out front with a Hummer parked with one or two wheels on it.

In the center of the building is a delivery and quick service area. It's open, airy, and glassy. Lots of natural light. The few times I've been in there it has been positively spotless. There is nearly always a car sitting in there waiting for it's new owners.

Each of the individual stores feels small... like a boutique. I'm sure that is on purpose.

Overall, if GM replicates this setup country wide, I'm sure they will do well.

The only thing about this is that around, like in a lot of places I would assume, Cadillac dealers and not stand alone and have no reason to add a Hummer or Saab dealer. Any of the Cadillac dealers I know of within 4 hours of Fargo are lumped in with a Superdealer that basically has every GM brand under one roof or are lumped together with a Chevy dealer or a PBG dealer.

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At Rydell in Grand Forks, ND they sell Chevy Cadillac Pontiac Buick GMC and Saturn. They were supposed to het a Hummer dealer but it didn't go through since there is already one in Fargo and Grand Forks is less than half the size. I would love to see them add Saab up there. As far as I know, there isn't a Saab dealer in ND which would make Minneapolis the closest.

Consolidating these dealerships makes good sense to me. Hummer and Cadillac appeal to the same buyers in a few cases and if Saab is going to start getting better product with the 9-4 and the re-done 9-5 and 9-3, I think they could fit on the same lot as Cadillac. I think Saab would look good in a classy Cadillac showroom as well.

that's where i got my aztek. i love what they did with their dealership. one of their sales guys is the brother of my dads most recent boss before he retired. my dad used to know the rydells who started it many years ago and used to sell implements to them. he's probably gotten over 10 vehicles from them over the past 30-40 years. now they have mondo dealers across the country, including the ford dealer by my house here where i got my 500. in both cases the sales experience has been excellent. they also have some saturn franchises down here too. they have a BPG dealer in SF too i think.

Edited by regfootball
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You know, in my post last night, I forgot to mention another dealer that isn't up to speed with the B-P-G dealer setup, and that's Courtesy Pontiac. I don't expect them to be selling Pontiacs for too much longer since I know they don't have adequate lot space for Buick and GMC vehicles too. I think it'll probably be Honda taking the place of Pontiac at that lot, since they also sell Acuras as well.

Edited by YellowJacket894
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