Cadillac Will Buy Out The Dealerships That Can't Hack It

Illustration for article titled Cadillac Will Buy Out The Dealerships That Can't Hack It

Good morning! Welcome to The Morning Shift, your roundup of the auto news you crave, all in one place every weekday morning. Here are the important stories you need to know.


1st Gear: Stay Out Of The Kitchen

As you may have read here on Morning Shift, Cadillac is in the process of implementing an aggressive overhaul strategy for its car dealers to make them into actual premium luxury stores and not slightly nicer Chevrolet lots. Under this Project Pinnacle, stores are separated into tiers based on sales volume and receive different levels of incentives to meet new brand standards.

The smaller and less urban stores have said this project is unfair, so Cadillac is saying that’s fine: here’s cold, hard cash if you can’t cut it and want to give up the franchise instead. Just not a lot of cash. Via Automotive News:

Cadillac is offering its 400 smallest U.S. dealers as much as $180,000 if they would rather give up their franchise than make the investment necessary to meet a host of new standards being imposed by the brand.

But Cadillac President Johan de Nysschen, while acknowledging that Cadillac has too many dealers relative to its chief rivals, said he is not trying to shed underperforming retailers. He said the transition assistance program announced to dealers today is meant simply as an alternative for those balking at his incentive program known as Project Pinnacle.

“Our target is zero” defectors, de Nysschen told Automotive News. “Our target is to have 100 percent of the Cadillac dealers engaged with the Cadillac business.”

The offers start at $100,000 and have a median value of $120,000, de Nysschen said. All of the dealers eligible for the offer sold fewer than 50 new Cadillacs to retail customers in 2015. They represent 43 percent of the brand’s 925 U.S. dealerships but only about 9 percent of its sales last year.

De Nysschen conceded there may be a hit to sales in the interim, but said he’s confident the bigger and better stores will make up the volume eventually.

2nd Gear: Chevy Banks On Dealer Network And Head Start

The jury is still out whether the new Chevrolet Bolt—which, from all I’ve heard so far, is a very impressive machine—can “beat” the Tesla Model 3. A car that does not yet exist. I’m also not certain that the two are true competitors, but the EV market is so small that they essentially are for the time being.


So what is Chevrolet betting on to “beat” the car that’s not out yet? That head start, and its extensive dealer network, reports Automotive News:

GM’s EV moonshot, the Chevrolet Bolt, likely will have a head start of at least a year over Tesla’s Model 3, which will have about the same range and price. The Bolt also has a host of practical advantages, including the thousands of Chevy sales and service outlets nationwide. Tesla doesn’t have nearly that kind of infrastructure, in part because of GM’s lobbying of legislators in Michigan, Texas and other states that have banned Tesla’s direct-sales model.

On the other hand, Tesla has the clear edge in cachet, the kind of image among early technology adopters that Chevy can only dream of. It also has more than 300,000 deposits from people drooling over the Model 3's impending arrival, whenever that turns out to be, given Tesla’s history of blown deadlines.

The question becomes: How patient will those consumers be when the car they have queued up to buy still doesn’t exist even as Chevy starts selling a comparable vehicle at a dealership right down the street?

“I think we’ll get some of those people,” said Steve Majoros, marketing director for Chevrolet cars and crossovers.


We’ll see.

3rd Gear: Audi’s CEO Wasn’t In On The Cheating

“This is on you jokers,” is what Audi CEO Rupert Stadler must have said in response to whether he knew about Volkswagen’s diesel cheating. Via Reuters:

An investigation commissioned by Volkswagen (VOWG_p.DE) into its emissions test cheating scandal has found no evidence against the head of its Audi luxury car division, three people familiar with the matter said.

Audi Chief Executive Rupert Stadler was questioned earlier this week by U.S. law firm Jones Day, which is conducting the investigation, about when he found out about the use of test-cheating software, the people said.

The findings are due to be discussed by Volkswagen’s (VW) supervisory board on Friday, they added.

[...] The questioning of Stadler, who has led Audi since 2007, coincided with media reports that the brand was more deeply entangled in the VW scandal than previously thought. Audi has declined to comment on those reports.

“Nothing burdensome against Stadler was found,” a source close to VW’s supervisory board said on Friday.


4th Gear: Unifor Close To A Good Deal

Canada’s auto union Unifor has negotiated a deal that could help save that country’s car production industry. Here’s the Detroit Free Press on Unifor’s proposed deal with General Motors:

General Motors plans to invest $554 million in Canadian dollars over the next four years and pay workers a $6,000 signing bonus under a proposed new contract with Unifor ratified by union members Sunday.

In total, members will receive $12,000 in bonus payments over the next four years along with 2% raises this year and in 2019.

Unifor, Canada’s largest private-sector union, reached a tentative agreement with the automaker Sept. 19 but did not release details about bonuses, raises or product commitments until it briefed its members about the contract during meetings Sunday.

About 4,000 members of Unifor who work for GM voted on the four-year contract. Of those who voted, 64.7% favored the agreement.

The agreement is viewed as a breakthrough for Unifor because it helps to keep existing plants open and helps to slow a loss of automotive investment from Canada to Mexico. It is also notable that Unifor achieved its other goals, which were to win a raise for its members and changes to the 10-year wage progression for newly hired workers.


5th Gear: Verizon Will Have A Lot To Do With Autonomous Cars

Why is that? Because the telecom provider is quickly becoming the leader in telematics, which The Detroit News describes as “a combination of telecommunications, vehicular technologies and real-time wireless data that are central to connected cars and self-driving vehicles.”


This is interesting:

Verizon most recently made moves to acquire Fleetmatics Group PLC for $2.4 billion and Telogis Inc. for an undisclosed amount. The Telogis deal closed on July 29. Fleetmatics expects to be finalized in the fourth quarter.

Both companies offer services for managing and operating vehicle fleets, which many believe to be the gateway for acceptance of self-driving cars.

Once both deals are closed, Verizon will control about 25 percent of the telematics market, according to C.J. Driscoll & Associates, a telematics market research and consulting company.

“They will be the largest player worldwide,” said Clem Driscoll, founder and principal of the firm in California. “These solutions can command a pretty good monthly fee and Verizon has a very strong name which they’re already applying to these companies.”


Reverse: It’ll Never Catch On


Neutral: Is Cadillac’s Dealer Strategy The Right One?

The brand seems determined to weed out the smaller, more uncompetitive stores who can’t offer what it wants. It makes sense, but are there unseen downsides?

Editor-in-Chief @ Jalopnik, 2015-2019.



One of the things that can attract a customer to Cadillac vs some of Ze Germans is the much larger dealer/repair network. There are definitely many Caddy owners out there who would “rather” have BMW or Benz, but went with Caddy because of distance to a dealership/warranty repair facility. I am referring to rural locales, where the Caddy dealer is ~20 miles away and BMW/Benz may be ~150+ miles away.