Published on November 25th, 2020 | by Steve Hanley0
Cadillac Willing To Pay Dealers To Go Away
November 25th, 2020 by Steve Hanley
It’s been quite a week for General Motors. First, the company announced it was putting another $7 billion in the pot to go along with the $20 billion already budgeted to make the transition to electric cars happen. (And about time, too!) Then CEO Mary Barra sent a letter to several environmental groups telling them the company would immediately withdraw its support for the Tramp administration’s efforts to block California from setting its own exhaust emissions standards. Barra promised in her letter that GM would now work cooperatively with all other automakers to heal the damage done by Tramp’s EPA so they can all move forward together in peace and harmony.
As part of the first announcement, Barra said Cadillac would be the first GM division to transition to selling only electric vehicles. The goal is to make that happen by 2030, which is a pretty short time in a business where the lead time to bring a new model to market is typically 5 years or more. But we’ve got a problem, right here in Motor City. And that starts with “p” and that rhymes with “d” and that stands for “dealers.” Once upon a time, car dealers were servants to manufacturers in every way. The companies abused their dealers horribly, which led to dealer franchise laws being enacted in most states.
But once the dealers gained some power over the manufacturers, they leveraged it to the hilt and soon the servants became the masters. Now it was their turn to hand out the abuse and owning a car dealership became a license to print money. That in turn led to a few big fish gobbling up the minnows and increasing their power even more.
Now, it seems some of the roughly 850 Cadillac dealers in the US are less than happy with the idea of selling electric cars. For one thing, GM is requiring them to invest $200,000 to upgrade their facilities to service those newfangled chariots and retrain their staff. For people used to raking money in, having to put money out is something they find distasteful.
Motor Trend, citing a report by Automotive News (subscription required), says Cadillac has devised a buyout program for reluctant dealers. Although the details are a closely guarded secret enforced by multi-page nondisclosure agreements, the gist of it is that Cadillac will pay dealers who don’t want to sell electric cars between $300,000 and $500,000 to relinquish their dealer franchise. There are rumors the payment could be higher for particularly obstreperous dealers who raise a stink.
But there’s a kicker. To get the cash, the dealers have to agree prior to November 30 of this year. “We wanted to move fast and make sure dealers are ready for the acceleration,” Cadillac North America Vice President Mahmoud Samara told Automotive News. “This is purely an option for those dealers who feel the EV journey is not suitable for them.” Dealers who take the deal will get new Cadillac products through the end of 2021 and will have access to Cadillac used cars at auction through 2024.
According to The Drive, for some low volume dealers the money may be equal to the profits they can expect to make selling new Cadillacs for 5 years or more. But attorney Len Bellavia tells Automotive News a franchise alone is worth more than $300,000 to $500,000 and for dealers looking at the long haul, the money involved in the buyout offer is simply not be enough. “If I’m 50 years old and planned on keeping [the dealership] for 20 more years and making half a million a year, how does $300,000 to $500,000 make me whole? Any franchise on its worst day could be worth over a million dollars, unrelated to how many cars the dealer is selling.”
Here at CleanTechnica, we tend to have a fairly jaundiced view of General Motors and its corporate machinations. In particular, we lament the fact that the company has so far refused to leverage the technology it developed for the Chevy Volt and Chevy Bolt and apply it to a wider number of models. The Volt — one of the better series hybrids ever offered by any car company — is now out of production and the Bolt has hardly progressed at all since it was first introduced, although a restyled version designed to appeal to the SUV crowd is in the offing.
And while The General is in fact committing a significant number of dollars to transition to being a major manufacturer of electric vehicles, it has funded climate deniers for decades and supported the outrageous auto emissions policies of the outgoing administration in court. Now it says it is withdrawing its support and wants to play nice with its competitors. Pardon us if we find that pivot a bit much to accept at face value. Can you say, “situational ethics,” boys and girls? Yeah, we knew you could.
The Drive, however, did offer a rather snarky interpretation of the dealer buyout plan. Author Stef Schrader summed up the program this way: “Perhaps this deal will make it tougher for Aunt Edna in Bumblepines, Texas, to get her XTS serviced, but it’s clear that she’s not who Cadillac feels is their target market anymore. It’s tough to say exactly who Cadillac thinks they’re for nowadays, though, with all the whiplash over everything from high-performance V-cars to the death [of the] Blackwing V8 to some genuinely lackluster crossovers. There’s some vague notion of ‘Youth! Maybe?,’ but that’s about all I can figure out for sure.
“I want to be optimistic that focusing on fewer dealers will allow them to cultivate some kind of focus elsewhere –especially in their product lineup. I want to believe! Yet if there’s anything Cadillac’s confusing recent history shows us for sure, it’s that one does not merely emulate the superficial aspects of other luxury brands and find success.”
Can GM tame its rambunctious dealers and turn them into lean, green, electric car selling machines? That’s a question that won’t be answered for several years but what seems safe to say is that if the dealers don’t get on board, they risk going the way of Conestoga wagon sellers. Furthermore, if they won’t play ball, GM will have a powerful incentive to bypass them and deal directly with the public the way Tesla does. The EV revolution has lots of moving parts and will involve many changes in the marketplace. There’s a decent chance dealers who refuse to adapt to those changes will simply become irrelevant.
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