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Bryan
Hagerty Employee

Avoidable Contact #86: You bet your Calais I’d take that Cadillac buyout

Let’s start with the over-simplified version of the story, the one you’ve already seen everywhere from newspapers of record to second-tire automotive websites: Cadillac announced it would probably be an electric-only brand by 2030, which seems like a long time away until you think about where you were in 2010. Cadillac’s dealer reps then told the dealers they’d have to spend some serious money to become “electric ready” between now and then. As is often the case, the dealers were given an alternative: they could take a buyout of between $500K and a million dollars to relinquish their franchise and walk away.

 

This sort of thing happens more often than you’d think, but until now it’s usually been related to aesthetics or a particular sales/service capability. You’ve probably noticed that all Mercedes-Benz dealers look alike now, and that all VW dealers look alike now, that sort of thing. Changes like that are expensive, so the manufacturers usually offer some sort of buyout as an alternative. Usually the number of dealers who take the buyout is between one and zero. Are you aware of a single Benz shop that didn’t adopt the expensive new architecture? Me neither.

 

Read the full column on Hagerty.com:

https://www.hagerty.com/media/opinion/avoidable-contact/avoidable-contact-86-you-bet-your-calais-id-...

 

66 REPLIES 66
Sajeev
Community Manager

And I took the job because it was a fantastic career move.(And I really liked what I saw in Hagerty too, obviously) So now you know. 🙂 

02-orignal-ownr
Detailer

Although I learned to drive (way back in the last century) on a '55 Cadillac Fleetwood (taking my driver's test in a Chevy, especially the parking part, was a breeze!), I've never been a fan of large cars, and have never owned anything larger than a mid-size pickup truck. 

 

But I do keep up with things automotive, regardless of make and size.  Since the demise of Cadillac's previous naming nomenclature (Fleetwood, Coupe de Ville, Eldorado--heck, even Cimarron!) I've not been able to figure out what's what with Cadillac models.  There seems to be no rhyme or reason to those alpha-numeric designations...and I'm sure that confusion really extends to the non-car buff buyers...

 

At least with their competition (BMW and M-B) you know the higher the number, the larger the car.  If Cadillac made (and properly marketed) a true competitor to the BMW 2--or even 4 series,  they could lower the Cadillac buyer's average age to below 60....

 

 

brb
Instructor

Well written and thought provoking.  A follow-on about how modern dealerships work would be welcome.

jlwm
Passenger

"Are you aware of a single Benz shop that didn’t adopt the expensive new architecture? Me neither." Star Motor Cars Mercedes-Benz in Houston hasn't been updated since the 1990s. Their Volvo store next door hasn't been updated since 1970.

ChevyDave
Intermediate Driver

Without knowing the specifics of which dealerships relinquished their Caddy franchises, it’s probably an exaggeration to characterize this as professional suicide; most of not all of these dealers will own multiple franchises; it’s extremely rare to see a stand-alone Caddy store not associated with at least a Buick/GMC franchise or part of a larger ownership group.
Sajeev
Community Manager

Star is the exception, not the rule. Not sure how that family got away with it! That said, their Aston Martin dealership seems pretty cutting edge.  

hyperv6
Gearhead

Lot of words and opinion on this topic but little use of the facts.

 

At one time you wanted luxury it was Packard, Cadillac, Chrysler or Lincoln. As time went on there came more competition from a number of makes and a more limited volume as prices rose and more companies got involved. 

As this story points out Cadillac has 880 dealers. Now think about this if you look at Mercedes or a number of the other Luxury brands they have only 300 to 400 dealers at best. They are spaced out to make it more profitable for these dealers. 

Cadillac on the other hand can have 3-4 dealers even in small markets. This drives competition and much lower prices. This makes it to where Cadillac is not bringing in the money to the dealers because of this. 

Many of these dealers are hang on dealers to a Chevy or Buick dealer and is just side money not the priority. 

GM as a whole has way too many dealers. They have tried to cull the poor dealers with buy outs by larger dealer chains. They have tried to cull many at the bail out and was stopped by government regulations.  Buy outs have been the last resort here as it is not cheap for GM to do this.

 

Ideally GM would like to cut many more than 150 dealers and I am sure some are holding out for more money. Cadillac should have 400 or less dealers and most should be the only one in most markets outside large metro areas.

 

This would drive for a stronger network of dealers with more profit and better service for the customer.

 

The idea that the dealers are leaving due to Electric is bunk. The ICE models will be there yet as the EV models are being added to the line up and not replacing ICE for a good while. When GM says EV will be 50% of a brand that means they will go from 6 models to 12.

 

GM is offering the EV products and letting the customers choose. If you still want gas it will be there.

 

The cold harsh reality is the coming regulations in some states and countries will force the buyers choices. Automakers will need to offer both or abandon some markets. 

The reason some dealers like Hyundai are so profitable is there are so few of them. Look at the number of Hyundai dealers in your area vs the number of Chevy dealers and you will see a 3 to 1 ratio at best. Less dealers means more sales for that dealer at higher profits. That means happy dealer and often better service and buying experience. 

As time goes on I see EV products being cheaper to build vs ICE models. Less parts, less labor, less development cost and a lot of shared technology. This could bring us cheaper more profitable cars to the customers. 

Recall with most electronics, it is expensive at introduction. But with time it gets better and cheaper. Computers, cell phones etc. 

 

Just look at the big screen TV. The first ones I saw in 1999 in Manhattan were $8,000. Today they are larger and have better pictures and you can get them at Target for $500. 

I am not a EV fan. I love feel smell and noise of a great ICE sports car, but I also have my eyes open watching what is going on. I work in the performance industry and it will aff3ct my living too. 

To be objective here you need to deal with all the facts and not your emotions. The development cost for any car has gotten out of hand. We will see more companies partner to share cost and work to remain independent. Others may still merge and some sadly will fail. 

GM has a great plan to bring EV products but not at the expense of ICE products. But a key is to fix a major issue they still fight that being poor dealers just do not put the effort or investment in due to low profits competing with like dealers. 

Many bailing here are not top flight dealers and even with no EV products coming these dealers should be put down anyways. 

When you often see more than one brand on a sign that is a sign of less commitment. 

Think of it this way. If you want a good steak you go to a reputable steak house. But if you just want steak and the quality is of little concern you go to a buffet. 

If the sign has Buick, Chevy, GMC and Cadillac.  That is a sign of little commitment to any one of these brands. Now if it just says Cadillac you can rest assure they will be much more committed to the brand. If they fail to sell a Cadillac they have little to fall back on. 

The bottom line is this no matter how good the EV models are the future for Cadillac must include less dealers. 

The reality is too many Admirals can not lead an navy effectively. 

Those who took they buy outs never had much ambition selling Cadillacs and never would have anyways.

 

 

motoman
Passenger

In 1965, my Parents brought home a Black Cadillac Sedan de Ville. I was only 13 at the time, but I hated it (except that it had an FM radio!). It did everything possible to isolate you from the Road, which is exactly the opposite of where I wanted to go. This feeling probably contributed to the 'Not your Father's Oldsmobile' ad campaign for the Boomers.  I did like the XLR, never understood why Cadillac killed that off. 

 

But after many years of owning small Foreign cars, many with manual transmissions, I picked up a pre-owned, Black BMW 650i Gran Coupe, with a large twin-turbo V8.  After reading this article, to my horror, I realize that I have become my Parents. 

Mockingbird
New Driver

ESCALADIQ” alone was worth the price of admission.  Excellent writing once again Mr Baruth.  

mhealy1
Detailer

I saw a great meme recently. It was the silhouette of a Tesla with the caption “They finally figured out how to use coal to run a car”.  I read that in northern Illinois 34 percent of the electricity is generated by plants powered by coal.  I wonder how that compares elsewhere.  
Zero emissions my rear. 

johnmarianmarks
Intermediate Driver

Nice job, Jack!

 

Two things. (1) In the early 1990s, I was told that Peugeot had forced all its US dealers to spend circa $250,000 upgrading their dealership buildings, with lots of the unique bits and pieces, especially interior stuff, sold to the dealers by Peugeot at a real profit. Peugeot then informed the relevant departments of the US Government that it was withdrawing from the US, except for a skeleton crew to ensure EPA compliance with the Fed-mandated extended warranty on the emissions-control systems.

 

As they say up at Harvard, Peugeot's US dealers were "unsmiling." (Perhaps there is another side to that story.)

 

(2) Re: Your comment "Dealers in most states have outstanding legal protection for their franchises." In 1956, Congress passed a US Federal "Day in Court" Act, intended to redress the then-power imbalance between manufacturers and dealers. (Some states though, now have protections that are even stronger.)

 

15 U.S. Code § 1222.

Authorization of suits against manufacturers; amount of recovery; defenses

 

An automobile dealer may bring suit against any automobile manufacturer engaged in commerce, in any district court of the United States in the district in which said manufacturer resides, or is found, or has an agent, without respect to the amount in controversy, and shall recover the damages by him sustained and the cost of suit by reason of the failure of said automobile manufacturer from and after August 8, 1956, to act in good faith in performing or complying with any of the terms or provisions of the franchise, or in terminating, canceling, or not renewing the franchise with said dealer: Provided, That in any such suit the manufacturer shall not be barred from asserting in defense of any such action the failure of the dealer to act in good faith.

(Aug. 8, 1956, ch. 1038, § 2, 70 Stat. 1125.)

 

FWIW & YMMV.

 

jm

RobH
Pit Crew

Very well said - I have a very good friend who lived through the first STS (three engines I believe?) a DTS (at least two engines in that one) and most recently, a CT6 (most reliable one yet, but uninspiring and the least "Cadillac like").  Interestingly, he now owns a 2020 Genesis G-90... I couldn't make this stuff up!  Great article and as I was involved in the 2009 GM debacle (from the Saturn side of things), I agree with everything you said.  Sad really.

SlowJoeCrow
Intermediate Driver

Dead on target, when I saw an article about this I concluded that most of the dealers taking the buyout were seizing an opportunity to bail out of a declining franchise or they didn't believe they would be profitable. These guys are for more concerned with GAAP than ICE vs EV.

Swamibob
Instructor

Hey Jack:

 

Hang on a minute here...  Back up the truck.  Cadillac is still around?  They make cars?  When did that happen?  The last Cadillac I remember was that all angles SUV that GM used, as a model, to make all their other cars look goofy and angular.  That was when I had a bunch of Cadillac nameplates made and stuck them on Camaros.  🙂  

I thought Cadillac went the way of the Dodo many years ago.  Apparently I haven't been paying close enough attention to what's on the road.  Or maybe more to the point, I haven't been paying close enough attention to the rebadges.  

 

I'm not a Cadillac buyer, nor am I likely to ever be one.  Particularly now.  The whole EV thing seems silly and way too politically driven.  "We the people, are too stupid to know what's in out best interests and for our posterity, do hereby give all previously held freedoms, liberties, rights and belief systems; to our Overseers so they can provide for the common defense, promote generous welfare and secure us from having any opinions, obligations or contrary beliefs to that of the Chinese Communist Party; do ordain and establish New Constitution for the United States of the CCP...."

Whoops, got off on an in side voice tangent there.  Sorry folks.  🙂  To be fair I don't care about EV vs ICE, I didn't realize the Immigration and Customs Enforcement had anything to do with Automobiles, did I miss something?  Maybe it's my Luddite tendencies coming back at me.  

I actually kind of like how Elon Musk played the Liberal Elite into giving him ridiculous amounts of both private and public money to create electric vehicles that can't be charged in California because their electrical infrastructure is questionable at best.  He's my hero on that front!  He's done what great Entrepreneurs have done forever:  He found a way to (t)make money from those who wanted to give it to him.  The whole Tesla thing couldn't come close to being profitable if not for a lot of outside investment and subsidies.  But, He saw the possibility of making money that way and jumped on it with both feet.  The General, I think, used to be like that, but more and more they seem to be falling back and running away from any kind of innovation or identity.  It's a bit of a shame that the only American Company that seems to build what the people want is really an Italian company.  Way to go Mother Mopar.

Great Column Jack.  Right on the number again.  Thank you.

 

 

 

el_zato
Intermediate Driver

Do it Jack, pull the trigger now. Buy the 2021 CT5-V Blackwing with the manual transmission, it will not only be the last Cadillac Sedan ever with a V8 and a manual transmission, it will probably be the last 4-door sedan ever available in the USA with a V8 and a manual transmission. God knows I would if I could, if only to send a message to auto manufacturers and dealers.
driverdude98
Intermediate Driver

I’m glad someone in automotive media still has some common sense and thinks outside the box. Refreshing.
jsmarsh
Pit Crew

Right on Jack. I've had personal experience with 3 Cadillacs: A 1931 V-16 that I took some good images of at a car show, My Dad's 79 coupe de Ville and my 2006 CTS-V. I've looked several times at new Caddys to see if there were any I would consider but nawwww... for the reasons you state, they don't measure up. That being said, my '06 V series (except for a lousy Differential) is the best car I've ever had. It's. still beautiful and balanced and lots of fun. The second generation was spoiled in styling and an overkill drive train. If I was a Cadillac dealer, I would take the money, cry a little, and run too.