Cadillac Offers to Buy Out 400 U.S. Dealers

General Motors Co.’s Cadillac luxury car unit is offering lump-sum payments to about 400 of its smallest dealers in the U.S. if they would prefer to relinquish their franchises rather than meet the brand’s new performance standards.

The payouts will average about $120,000, and the overall program will cost roughly $50 million, brand President John de Nysschen tells Automotive News. He describes the offer as an option and not an attempt to force out dealers. But he also reiterates a previous observation that Cadillac has considerably more dealers than its Asian and European rivals.

Almost all the 400 targeted dealers own multiple GM franchises, and more than 70% derive less than 10% of their revenue from Cadillac sales, according to de Nysschen. He says eligible dealers must decide by Nov. 21 whether to accept the buyout. Those who do would be expected to close out their Cadillac operations at the end of 2017.

Dealers who elect to stay on face Project Pinnacle, a program that will launch on Jan. 1. The scheme will divide Cadillac outlets into five sales tiers. The highest-volume dealers will qualify for the most incentives, including those that would enable them to lower their prices. The smallest sellers won’t be allowed to maintain on-site inventory and will be require to take orders using virtual-showroom technology.