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Cadillac store plan in jeopardy

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Cadillac store plan in jeopardy

Arbitration could thwart GM focus on metro markets

Neil Roland

Automotive News -- January 25, 2010 - 12:01 am ET

WASHINGTON -- General Motors Co.'s apparent strategy to bring Cadillac's dealership network more in line with its foreign competitors could be undermined by the arbitration process.

If arbitrators rule in favor of many Cadillac dealerships, it would leave GM with far more small-town showrooms than it wants.

GM has been quietly pushing Cadillac sales in large metropolitan areas and shedding dealerships in less populated regions, dealer lawyers and consultants said.

Cadillac dealerships will file a disproportionate share of GM's arbitration claims because most were targeted for elimination as a result of their small-town location rather than their performance, dealer lawyers said.

As the midnight Jan. 25 filing deadline loomed for rejected dealerships, hundreds of Cadillac showrooms prepared to give notice of their intent to seek reinstatement, the lawyers said.

"It seems like the GM strategy has been to align Cadillac to look more like BMW, Mercedes-Benz or Lexus in terms of focusing dealerships on urban areas on the east and west coasts," said Scott Watkins, senior consultant at Anderson Economic Group in East Lansing, Mich.

Some rejected Cadillac dealerships have hired the consulting firm to testify during the arbitration process on the economic viability of their stores.

Watkins said he has spoken with eight rejected Cadillac dealerships that are current or potential Anderson clients.

GM said it wants to cut its Cadillac franchises by one-third -- from 1,422 on Jan. 1, 2009, to about 500 by the end of this year.

Those 922 Cadillac dealerships account for nearly half the 2,000 GM franchises marked for termination by October.

GM declined detailed comment about its Cadillac dealership strategy, its planned cuts or its expectations for arbitration.

GM told many rejected Cadillac dealerships this month that the main criterion they failed to meet was "networking viability and throughput issues," the lawyers said.

"It means GM wanted to sell more cars through fewer dealers," said Anthony Giardini, general counsel of the Committee to Restore Dealer Rights, a group that represents rejected dealerships.

"It has nothing to do with performance. GM is saying we just don't want to be in that market."

In contrast, most of GM's non-Cadillac dealerships were given performance-related criteria, such as "retail sales index" or "dealer performance score," as bases for their rejection, said lawyer Mike Charapp of McLean, Va.

Trying to get thinner

U.S. dealerships as of Jan. 1, 2009

BMW 338

Cadillac 1,422

Infiniti 181

Lexus 226

Mercedes-Benz 347

Source: Companies

Small-town excellence

One small-town Cadillac dealer, Charles Spadafora Jr. of Indiana, Pa., said his showroom ranked in the top 10 percent in the state according to GM's performance measures including sales, capital and customer satisfaction.

GM's termination of his franchise, as well as that of a neighboring Cadillac showroom, left the closest Cadillac dealership almost an hour's drive away, he said.

"A number of our customers told us they wouldn't buy another Cadillac because they didn't want to travel at least 45 minutes to get it serviced every time something goes wrong," Spadafora said.

Spadafora, 34, said the Cadillac dealership was started by his grandfather, Cecil, in 1947. When GM told him of his termination last year, Spadafora said his first thought was of his grandfather.

GM told Spadafora, who is filing for arbitration, that his criterion for rejection was "networking viability and throughput issues."

The Jan. 25 filing deadline was set in a law signed by President Barack Obama last month establishing arbitration for rejected GM and Chrysler Group dealerships.

More than 1,000 targeted showrooms out of a total of 2,789 are likely to seek arbitration, dealer lawyers estimate.

Binding arbitration decisions are due in June.

Rural advantage

"We are committed to participating in a professional, effective arbitration process for the dealers from each of our four brands that received complete or partial wind-down agreements and want to file for reinstatement under the federal legislation that is in place," GM spokeswoman Ryndee Carney said.

Some dealer lawyers contend GM would be helped by a restoration of eliminated Cadillac franchises.

Said Charapp: "The decision to have Cadillac abandon small-city and town markets where it dominated as a luxury brand to concentrate on large metros where it does not is the automotive equivalent of New Coke."

Read more: http://www.autonews.com/article/20100125/RETAIL03/301259949/1260#ixzz0ddfsarGE

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I hope folk keep these government & legal intrusions in mind when they blanket GM with 'can't do anything right' judgement.

It's also advisable, IMO, to keep in mind GM first came to the Gov with a plan, in part which detailed how many dealers they wanted to close, and the Gov said 'Not enough'. GM came back a 2nd time with a much longer list. Now the Gov is facilitating (and if it fits the law, so be it) challenging that which the Gov approved in the first place. I fear this flip-flop will go forgotten, and that 'blanket' will fly at will in the future.

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Gotta say, this is GM's idea of increasing sales and profitability? Stoopid.

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Having some type of market saturation in rural areas is beneficial for the main reason of having the conveniences that are afforded by the dealership.

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Noting like having a lot of weak dealers vs a smaller stronger network.

Running companies like a social program just does not work. In business there are winners and losers that is how it works. To fix what is wrong some people are going to lose. These dealers would be smart to pick up a franchise that is not in their town that cost less as it would help them with more sales in most cases.

Large Metro areas count for most Cadillac sales so why would you want one in some small farm town? Old Mc Donald is not driving a CTS V.

Edited by hyperv6
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But the point is that they are running it as a social program. They're cutting stores (at least one documented) that's in the top 10% of the state of PA.

Having grown up in a small town with a standalone dealership they did pretty well if only because people who could afford buying a car that costs that much got tired of having to drive 50-75 miles round-trip to get the Mercedes or BMW serviced under warranty.

In the mean time West LA has gone from 3 Cadillac dealerships to one in the last ten years, and the one that's left is going to get hit by the closure of Pontiac and Saab.

Old McDonald might not be driving a CTS- but his doctor, lawyer and accountant might. ;-)

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>>"Old Mc Donald is not driving a CTS V."<<

No doubt catering to gross stereotypes will do wonders for sales, too.

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Lexus has 1/6th the dealers as Cadillac, yet outsells them around 2-1. Quantity of dealers must not matter. Much like Toyota has 1/3rd the dealers as Chevy, didn't seem to stop Toyota from selling as many cars.

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Lexus has 1/6th the dealers as Cadillac, yet outsells them around 2-1. Quantity of dealers must not matter. Much like Toyota has 1/3rd the dealers as Chevy, didn't seem to stop Toyota from selling as many cars.

This is a valid point.

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Well, one thing to also consider, I guess, is that if the buyer has no local luxury buying options, they will have to travel a distance no matter what car they buy.

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Well as smk points, Lexus owners seem willing to do that. I'm sure Cadillac could manage as well.

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But the point is that they are running it as a social program. They're cutting stores (at least one documented) that's in the top 10% of the state of PA.

Having grown up in a small town with a standalone dealership they did pretty well if only because people who could afford buying a car that costs that much got tired of having to drive 50-75 miles round-trip to get the Mercedes or BMW serviced under warranty.

In the mean time West LA has gone from 3 Cadillac dealerships to one in the last ten years, and the one that's left is going to get hit by the closure of Pontiac and Saab.

Old McDonald might not be driving a CTS- but his doctor, lawyer and accountant might. ;-)

One dealer that had any number out of how many? Besides PA is out of town for the most part accept for Philly. Even Pittsburg is not just a glimer to the real metro areas in the country.

If people want the car bad enough they will drive to it as the other makes have proven. The whole point here is profit more than volume. IF ever job bob has a CTS where is the image? Porsche started to sell so many cheap cars in the 70's and 80's they lost the image of being the in car that not everone had or could afford. They cut back and raised prices. They made more money on less cars and have a class A image.

There was a time not everyone could buy a Cadillac and it ment you were someone special. Heck My mother in law has a DTS that presents no image what so ever. Lord knows it gets here to pick up here packages from QVC! LOL!

GM has learned what so many others have learned Less is More in the Luxury field. The idea is not to sell as much as you can as it is to sell less and charge more. Why do many people like Ferrari's, Rolls and Bently? Because few others have them or afford them. It makes them stand out that they are the special ones who can offord them. They are willing to pay the price to enter that club.

Not that Cadillac will ever be in the Rolls class but you also see it in the BMW line too. Once you get over the entry class not everyone can afford a M5 or higher car.

Even back in the V16 days even the V8 Caddy still showed you were special. Much of this was losed after 1959 when Cadillac just became another mass produced GM car. Only the late 60's Eldorado gave them some hope.

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As long as a dealer is profitable and continues to buy cars from GM, (and in this case is not a drag on image)- it's hard to understand the motivation for minimizing the # of dealers. If they were GM stores, it be understandable. I've yet to see the explaination behind is all.

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I've yet to see the explaination behind is all.

"networking viability and throughput issues."

:smilewide:

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Right: while those are words... and in English, they do not explain much.

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The facts stand for them selves here.

Most Luxury car dealers are not on ever street corner not ever little town. Many of their models are not ultra high volume cars. Most thrive on the fact they are not 1 of ever 5 cars you pass unless you are Newport Beach take you pick of which one or any other neigborhoods or towns in the La Jolla mold.

For Cadillac to meet and match the hight priced brand they need to sell at a low volume but get more per car like the rest. They need to stop this crap of spraying a car pink for the Mary Kay sales winner in the double wide. You don't see BMW or Benz doing this do you?

GM needs a dealer network for Cadillac that will support a low volume car but still remain strong by ruling over a larger area. You can have a 1,000 dealers selling 50,000 cars or you can have 500 dealers selling the same 50,000 cars. The 500 dealers will be stronger and better suited to dealing with the customer and offering better service since they will be more profitable.

As for the top selling dealer in the middle of no where. Often there is more to this than they are telling you. We had a very old Chevy dealer here in Ohio that wClaimed to be a top seller in our county. They were cut and cried a river that sounded like a legit story till you dig a little deeper.

What the Chevy dealer failed to state is they were not tops in service, they were told to relocate years ago to be near a interstate. They did have enough money they made off the Chevy dealer to build a Mercury/Lincoln dealer, Hyundi Dealer and Misubishi Dealer, and to Saturn dealers on the highway they were told to relocate the Chevy dealer.

The fact is there are other Chevy dealers that have invested in new buildings in better locations and gave Chevy what was asked for. So if you have to cut do you kill the guy who just invested a lot of money for your brand or the guy who is not high service and failed to replace the building you have been in since 1930 that is in great need of repair?

Besides even Saturn dealers were not on every street corner and they did fine when they were still popular and before they let the product go stale. I know people that drove for miles to buy and service there car with no complaint.

We also had a Pontiac Dealer here that built a new building a year and a half ago. He also was the counties best GMC dealer. He is getting a Buick dealer that is being removed from a older dealer off the highway. He was told last year with Pontiac's death you will be taken care of and don't worry. Well he now knows why.

Even though he is a Buick/GMC dealer in a rual area. Note also his staff has also been trained to service ans repair Cadillac's. I am wondering if GM may also be working to make it so if needed you can just take your Cadillac to any GM dealer for service if needed?

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mercedes.jpg

Frankly, for Cadillac to still be offering custom colors is pretty amazing (the cars are repainted at the factory in RPO colors when their useage term is up).

But what are the 'facts' here specifically WRT the number of Cadillac dealers ??

'Selling @ low volume but with more profit' I agree with in principal, but its not related to dealership count.

The only possible argument I see posted above is regards to service- and -akin to classroom sizes- I would expect better, more personable service from a dealer that is handling -say- 150 cars vs. 1000. Best dealer service I've ever had was from a dealer so small they didn't have an interior showroom. The bigger they are, the less they care or have time to.

Edited by balthazar
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