Virtual inventories, 24-hour roadside assistance and brand reputation consultants are — for now — no longer requirements of Project Pinnacle, Cadillac’s ambitious and contentious program to overhaul its dealership operations.
Cadillac has again modified several of the standards to allow dealers to make a smoother transition into Pinnacle’s new incentive programs. The overall structure and quarterly dealer rewards remain, but some brand-standard requirements and costs have been reduced, according to Cadillac executives and an updated September 2017 program guide obtained by Automotive News.
The changes range from top-tier dealers not being required to work with “reputation management” companies to the smallest dealers being allowed to keep physical vehicle inventories. A previously reported “exceptions process” also was implemented for the program, which launched April 1.
“We are not our dealers’ enemy,” Cadillac President Johan de Nysschen said in a phone interview. “We are here to work together, but it is going to require a shifting in approach over time from both ourselves and our dealer partners.”
Project Pinnacle is arguably the largest overhaul of dealer operations in General Motors’ history. It’s part of de Nysschen’s plan to position Cadillac as a stronger competitor in the global luxury market and distinguish it from GM’s mainstream brands.
The program groups participating dealers, which represent 99 percent of Cadillac’s U.S. sales, into one of four tiers based on sales and market area but adjusted for luxury segment growth or deterioration. Dealers can choose to move up tiers and adhere to additional requirements for enhanced rewards. Dealers in the fourth tier also may choose to drop to a fifth tier, where they aren’t required to operate a traditional showroom or keep inventory.
Enrollment fees, bonuses and investment costs vary by tier. But for the most part, they are structured to encourage larger dealerships to stay within their designated tier.
“Pinnacle is designed to reward those who play a part,” de Nysschen said. “Those who do not will not get the rewards. That has always been the approach.”
Other notable changes from roughly a year ago include incentives of $28,000 or $30,000 on the purchase of Cadillac Escalade roadside-assistance vehicles (valid on one purchase every three years); a decrease in retail sales performance targets, including the addition of a fourth level; and changes in weighing customer satisfaction indexes.
‘Pinnacle is working’
Approaching six months into the program, de Nysschen says Project Pinnacle is gaining momentum and showing “some very tangible improvements” in business operations, among them: improving customer-satisfaction scores, the launching of Cadillac-specific dealer websites and a 46 percent year-over-year “surge” in its certified pre-owned business.
“These things take time to flow through the system, but the [combination] of all these shows Pinnacle is working and the money will flow to those who are achieving the numbers,” he said.
Will Churchill, head of the Cadillac National Dealer Council, doesn’t disagree. The dealer principal at Frank Kent Cadillac in Fort Worth, Texas, said many of the initial concerns from dealers have been addressed.
“As we’re now digesting the second quarter of Pinnacle, I think dealers are settling into it,” he said in a phone interview, adding that the program “measures your dedication to the Cadillac brand.”
The council, according to Churchill, has been working with de Nysschen on changes to Pinnacle, which was delayed twice to allow dealers more time to understand it and position themselves for higher rewards.
The council is expected to meet with Cadillac this week to discuss changes for 2018, including sales marks and customer satisfaction surveys. Dealers, Churchill said, have a “fundamental problem” with tying some brand standards to customer responses because a customer could incorrectly answer or have forgotten a service was offered.
De Nysschen, who came from Infiniti in 2014, also mentioned finding an appropriate “measurement tool” for customer satisfaction and the “right balance” of questions for consumers.
“We will continue to make fine-tuning adjustments, and those are the kind of conversations we’re having with our dealer council,” he said.
Cadillac has said Pinnacle will cost $800 million more than its current dealer incentive programs, regardless of how many dealerships comply with the standards for their tier, with any leftover money being distributed among the dealerships that complied with the standards assigned to them.
Much of the early controversy around Pinnacle involved how the tier system treated small dealerships, including more than 400 that annually sell fewer than 50 vehicles. Some saw the plan as an attempt to muscle those stores out and take away their showrooms and inventory for a new “virtual” strategy if they didn’t agree to buyouts. Few dealers accepted the buyouts offered a year ago, and de Nysschen said he doesn’t plan to offer them again.
“It caused a lot of angst for our small dealers, and I have absolutely no intention of wanting to cause tension between Cadillac and its dealer body,” de Nysschen said. “It’s intended as a constructive move forward to recognize what the future implications for retail distribution are.”
The option of virtual showrooms and virtual inventories remains in the voluntary Tier 5 of Project Pinnacle. Stores would be required to invest in a virtual-reality system that’s expected to cost $10,000 and feature the brand’s vehicles and options.
Cadillac has launched its first virtual reality system at a dealership in the wealthy New York suburb of Greenwich, Conn. A representative from the dealership wasn’t immediately available to comment.
Churchill, whose dealership was designated a Tier 2 but opted for Tier 1, said the virtual strategy was intended to help smaller dealerships — many of which can’t afford to have a diverse inventory on their lots — particularly as Cadillac’s lineup grows beginning next year with the introduction of the XT4 crossover.
Pinnacle’s requirements and standards, according to de Nysschen, will continue to be refined based on the brand’s lineup, industry trends and other factors such as feedback from dealers.
“All of those things need to be taken into account when we design the next version,” he said. “I think the basic principles are unlikely to be changed. It’s a matter of fine-tuning and reweighing your priorities as your needs change.”
• June: Cadillac postpones Oct. 1 launch to Jan. 1, 2017.
• September: Cadillac offers $100,000-$180,000 buyouts to its 400 smallest dealers.
• October: Dealers representing 99% of the brand’s retail volume enroll in Pinnacle.
• November: Cadillac postpones launch to April 1, 2017; fewer than 20 dealers accept the buyout.
• January 2017: Cadillac modifies Pinnacle terms, adding appeals process for those deemed out of compliance.
• February: Cadillac dealer council undecided on endorsing plan
• April 1: Pinnacle launches.
• September: Cadillac eases requirements for enrollees.
Fuente: Automotive News