May 20, 2022

Botu Linum

The Car & Automotive Devotees

Cadillac dealers: ‘No. 1 focus is customer experience’

8 min read

How do dealers feel about the reservation system rolled out when the Lyriq was revealed? Is this a sustainable sales model?

It’s not a bad program. Most manufacturers are doing it. All dealers wish there was a lot more inventory. Demand was much higher than what the actual [sales] number was. I could have sold 20 to 50 times more than what we got. We have a long, long waiting list for the car. The process doesn’t really change anything. It’s reserving a car. Dealers deliver the car and make the front-end profit, the finance profit, the used-car trade-ins. It did bring in nontraditional Cadillac customers. I could have sold 500. The car is very, very popular.

Is Cadillac adequately advising and providing resources for its dealers on how to prepare for the rollout of electric vehicles or other industry developments, such as the Super Cruise driver-assist system?

On EV, yes. It’s a very good communication process. Super Cruise is pretty simple. There is nothing special to be done. We just need more [vehicles with] Super Cruise. It’s very, very popular among consumers.

What is the feeling of the remaining Cadillac dealer network after about a third of dealers accepted buyout agreements?

If you really want a luxury experience, a luxury showroom, the dealer to spend more money, the throughput has to be higher.

It’s really a positive experience because there is the same amount of cars among less dealers. If you want to have a good luxury experience, you have to have a higher throughput. The new model will make a lot of sense.

Does Cadillac aim to add many dealers, other than the three in New York, Atlanta and Beverly Hills, Calif.?

Adding new Cadillac dealers I don’t think is in the plans. They aren’t really looking for new points. They are looking to make sure markets make sense.

Are Cadillac dealers signing up for the Tekion-powered Digital Retail Platform?

The DRP process is very easy. All of our stores are signed up. The deadline was Feb. 12. Every dealer realizes we need some sort of platform. I think all the dealers are really open to the DRP.

What are the differences between the Digital Retail Platform and Shop-Click-Drive?

DRP does a deeper dive. Communication is better between the customer, manufacturer and the dealership. You can do a lot more on the DRP than Shop-Click-Drive.

When will Cadillac Financial launch and how are dealers reacting to it?

They are rolling that out very slowly. When you are dealing with a luxury customer, you need a luxury experience even with financials. The dealers are welcoming Cadillac Financial, especially standalone dealers. It should roll out this year. By year end, it should be going 100 percent. They are testing, piloting how the phones get answered. They want to make sure this thing is functioning correctly before they roll everything out.

Why is it important to have a separate luxury brand for the captive?

The experience the customer will get. You have Audi. Even Infiniti is separate. Lexus has Lexus Finance. It’s crucial. Because Cadillac is a luxury brand, you need to give customers a luxury experience. When they call their finance institute, it should say Cadillac Financial. It’s not any different than a customer being in a showroom.

How has Cadillac adjusted its image program?

All four of my stores will be imaged by June.

It entails the outside look — the panels, tiles, the lights, how the cars are displayed, the furniture and the artwork. The difference is day and night. People are much more relaxed. It’s a huge difference between the old image and the new image. When they announced it, I was like “Are you serious? I just got done imaging my stores.” But now since I got two completed and a third one is almost done, now I can appreciate that. It’s high-tech, more inviting, the lighting is different. It’s a totally different environment.

What’s missing in the product lineup?

We have a full SUV line. We’ve got Escalade. We’ve got XT6, XT5, XT4. We have two car lines. For a luxury brand, we are pretty much covered. When I look at the other luxury brands, I think our lineup is equal to them right now. A lot of them don’t even have the full-size SUV like Escalade, and a lot of them don’t have the cars like Blackwing. I think our coverage is good right now, especially with the electric lineup coming.

Which product are dealers most looking forward to?

Escalade, Lyriq, Blackwings are just amazing. People line up for Blackwing. I’m getting 10 text messages a day; it feels good to be a Cadillac dealer and having some hot product right now.

How is Cadillac dealers’ profitability?

It’s the highest ever. 2021 was one of our best years. As we know, it will probably settle down. By the time it settles down … the thing with Cadillac it’s either you’re in or you’re not. If you sign up for Pinnacle, you will be fine. If you don’t have Pinnacle, you’re going to struggle. That’s what it really boils down to. [Under Pinnacle], all the money that we get … is a pretty large amount.

Has Cadillac made changes to Pinnacle recently?

For the dealers, there are a lot less items that you have to meet. Cadillac did a great job listening to the dealer council to make Pinnacle less complicated.

How has Cadillac helped dealerships navigate the changes brought about by the inventory shortage?

Certain sales are actually up, like the Escalades. They have done a great job communicating. We have [Cadillac] calls and communication with [GM President of North America] Steve Carlisle, saying exactly which plants are working, which plants are down. And also you can go on the website and track each car. They can’t control the chip shortage, but they have done a great job communicating. We always know what the status is, so we can deal with our customers from that point of view.

When do you expect Cadillac’s production and inventory levels will come back in line with demand?

Nobody really knows but we are starting to see XT4s coming in, XT5s coming in, XT6s. By midyear, hopefully we’ll be back to normal. Inventory levels are still low, but they are probably three times higher than what they were at the lowest. So you’re already seeing a big improvement.

Could lower inventory become a long-term retail model?

I think the lower inventory is crucial. Our No. 1 rule at our stores is try to take the sold orders to 60 percent. This way, the dealer carrying cost is low, your marketing is less, your advertising is less, your flooring is less. We’re hoping for the same amount of sales, but less inventory on the ground. We don’t want to be where we’re at, but we certainly don’t want to go back to where we used to be.

What about incentives?

I would assume if inventory levels rise, incentives will come back up. But I don’t think we’ll have the inventory level we used to have, and I don’t think we’ll have incentives at the levels where they used to be. High incentives aren’t good for the dealer or the manufacturer. I think on certain models, there might be some incentives, but they will be nowhere near where they were before COVID.

How are dealers coping with the inventory shortage?

The used business is also tough because it’s hard to acquire used cars at the auction. Your buying strategy has to be different, how you acquire cars. Most people are buying their leases back, and rental cars aren’t where they used to be. That market is tough, not just the new market. I think in service and fixed, we are doing a better job. We realize how much we have to depend on fixed operations. [Dealers are saving because of] expense reduction from the flooring, the marketing and less people. The average gross per employee has gone up from pre-COVID.

How are dealers handling new-vehicle pricing?

It’s a mix. I think certain dealers are doing MSRP and certain dealers are adding the markup. Once supply comes in, it will probably balance out. It’s a mixed bag. It’s a controversial subject. I think once inventory gets a little bit better, it will balance out. Steve Carlisle told dealers you have to be transparent. You have to make sure you are advertising the price you sell the car for.

Are Cadillac dealers concerned about legislative efforts to allow startup electric vehicle manufacturers to sell directly to consumers?

I think that is a big concern for the whole industry. In the end, we have to learn how to compete with them. I think the traditional manufacturers have an advantage over them with the dealer body and the service we can provide and the customer experience we can provide. We can only control so much, but we can improve ourselves and how we deal with the customer and more transparency. It’s going to push us to be better dealers.

How are the skills needed for sales employees at Cadillac dealerships changing in an increasingly digital sales environment?

We have experience for non-Cadillac electric cars. Consumers will know more about the car than you. You have to really understand the product, and your online skill needs to be much better, especially with the DRP sales. And transparency will be really important. You can’t tell the customer one price on the phone and when they come in, it’s another price. There’s going to be a big shift, not just for Cadillac, but for any brand going to electric or online sales.

How are Cadillac’s fixed operations performing?

Very strong. It’s going up. Because the new sales number dropped, people are keeping their cars a bit longer. Then fixed operations is up from previous years.

After diminished leasing volume for some automakers in 2021, what are Cadillac’s plans to promote leasing in 2022?

Until inventory builds back up, lease volume probably will not be back to normal. Escalade is not the highest leased penetrator. The XT4, XT5, XT6 and sedans have more leases. Until inventory levels are back up where they should be, the lease probably won’t come back to normal.