Caddy Exec: Dealers Part of Brand's Problem

[Fgts]

Audi is about to spend $36 billion, That's serious money, the likes Cadillac and Lincoln will never see.

Is this the camel that breaks the straw's back, has VW finally bitten off more than it can chew?

I read a bit into it it seems Audi will have "access" to $36b in technology and platforms but not actually spending that much.

 

But again if VAG that arrogant to allow Audi to spend that much, i'd love to see that train wreck in the end.

[jpd80]

I read a bit into it it seems Audi will have "access" to $36b in technology and platforms but not actually spending that much.

 

But again if VAG that arrogant to allow Audi to spend that much, i'd love to see that train wreck in the end.

 

 

No, Audi intends spending that much to incease models and sales by 2020:

So that's around $6 Billion a year, with just over $4 billion a year into new product.

 

AUDI has announced it will expand the biggest investment program in its history to a record €24 billion ($A36 billion) in a plan that includes increasing its range from 50 to 60 models by 2020.

 

In 2013 the German car-maker announced it was embarking on a €22 billion program to chase an extra 500,000 sales a year. Now, another €2 billion has been added to spending spree.

 

Audi chief financial officer Axel Strotbek said the majority of the funds would be channeled into expanding the model line-up.

 

“Seventy per cent of all our investment in the next five years will flow into new models and innovative technologies,” he said.

 

“Despite the growth in total investment, we will keep a watchful eye on the upcoming challenges and exercise the required cost discipline.”

More at Link

[akirby]

$6B/year - or as Cadillac calls it, petty cash.

[RichardJensen]

Welcome to the wonderful world of Teutonic obfuscation.

 

These figures are exaggerated totals, as they include not only R&D into new product but routine expenditures on physical plant.

[Pioneer]

$6B/year - or as Cadillac calls it, petty cash.

CDW-27 cost Ford $6 billion back in the early 90's.

[PREMiERdrum]

CDW-27 cost Ford $6 billion back in the early 90's.

I just threw up a little bit in my mouth.

[jpd80]

I have a suspicion that figure was more like $4 billion, the blow out mostly because

CDW27 was a dumping ground/cost center for other less profitable cost centers .

 

There's more to those figures than the development and production of Mondeo, Contour and Mystique.

 

I get that Audi is heaping in its total costs on the figure quoted but when Lincoln does

something like that and looks to spend a few billion over several years, it's seen as lunacy.

 

If GM wants to play with luxury brands, it must be prepared to back Cadillac with huge cash,

Something Ford was not prepared to continue doing with Jaguar, Land Rover and Volvo.

Those three brands combined platform cycle and production costs would make Audi's

proposal look like a bargain.

Edited January 3, 2015 by jpd80

[RichardJensen]

CDW-27 cost Ford $6 billion back in the early 90's.

 

IIRC, Austin pointed out that this total included a lot of the IT infrastructure for Ford 2000, the Duratec V6, the Zetec 4, the EAOD transmission, and the actual product.

 

And, I believe that subsequent to this, nobody at Ford wanted to push for a new engine or transmission because it would just about kill the profitability of their program, while other programs would get the engine/transmission 'for free'. Hence the over ten year gap between the launch of the Duratec V6 and the 3.5L V6.

[LincolnV]

Additional comments from Cadillac boss about dealers:

 

http://www.detroitnews.com/story/business/autos/general-motors/2015/01/21/cadillac-considers-boutique-stores-small-dealers/22144177/

[akirby]

Just when you thought it couldn't get any worse.......

 

Let's create a tiny showroom with only 2 vehicles, then add touch screens to look at the ones that aren't there.

 

I've run out of words.........

[fuzzymoomoo]

so let me get this straight

 

1. alienate your customer base

2. alienate your dealer network

3. ????

4. PROFIT!!

 

 

sounds like a sound plan to me!

[LincolnV]

Let's create a tiny showroom with only 2 vehicles, then add touch screens to look at the ones that aren't there.

 

When I worked in a retail backoffice, if a customer came in looking for a product and the sales associate didn't have what they wanted in stock, there was only a slim chance that the customer would make the effort to come back after they were promised "we can order one in." Sometimes they would move to something else that caught their interest.

 

With this discussion of "boutique" dealerships my first question would be, if there are two cars in the small showroom, does that mean we can put a small representation of all the other models on the lot?

[sullynd]

Our local caddy dealer just finished remodeling their "H" Hummer showroom which was only a year or so old when hummer folded to get rid of the H and turn it into a GMC showroom. Wonder how many other Caddy dealers also got stuck with an "H".

[akirby]

 

When I worked in a retail backoffice, if a customer came in looking for a product and the sales associate didn't have what they wanted in stock, there was only a slim chance that the customer would make the effort to come back after they were promised "we can order one in." Sometimes they would move to something else that caught their interest.

 

Especially with cars. Very few people are going to order a vehicle without seeing it in person. And how is the dealer supposed to sell enough vehicles to make a profit?

 

Unbelievable. How did this guy ever get hired?

[rmc523]

Well, these comments certainly lend credibility to my thought of the intentional high prices to weed out under/low-performing dealers...

[RichardJensen]

But they're not going to go away, RMC.

 

These dealers de Nysschen wants to get rid of, they're dualed dealers. It's a Cadillac/GMC/Buick dealership that is just going to sit on that franchise until somebody buys it from them.

 

GM can't get rid of them, and they can't starve them out because, for crying out loud, they're hardly selling any Cadillacs to begin with--as compared to Buick and GMC.

 

How you can tell that de Nysschen just doesn't get it is that he says that Cadillac has too many dealers, and then he says that they aren't going to buy out franchises.

 

Hey Johan-------------when was the last time that you solved a problem just by wishing it would go away?

 

Cars suck? You got to spend money.

 

Dealers suck? Guess what, bud, you gotta spend money.

[rmc523]

But they're not going to go away, RMC.

 

These dealers de Nysschen wants to get rid of, they're dualed dealers. It's a Cadillac/GMC/Buick dealership that is just going to sit on that franchise until somebody buys it from them.

 

GM can't get rid of them, and they can't starve them out because, for crying out loud, they're hardly selling any Cadillacs to begin with--as compared to Buick and GMC.

 

How you can tell that de Nysschen just doesn't get it is that he says that Cadillac has too many dealers, and then he says that they aren't going to buy out franchises.

 

Hey Johan-------------when was the last time that you solved a problem just by wishing it would go away?

 

Cars suck? You got to spend money.

 

Dealers suck? Guess what, bud, you gotta spend money.

Well yeah, I didn't say he had a plan to do so aside from hoping it'd happen. But it seems that's the direction he's (poorly) attempting to go. Yeah, that 2-5 car showroom idea sounds pretty bad for a purchase like a car - people want to be able to see, sit in, etc the vehicle they're thinking of buying.

 

I mean is the proposal that it would be the same size lot with a ton of inventory GM is jamming down dealer's throats, only with a smaller dealer building? Or does GM plan to actually reduce production (and therefore bloated inventory) to right size it to sales, meaning a smaller dealer building and smaller lot? At which point, I think you just run into inventory issues at those small locations to go along with the limited showroom, leaving me wondering what the point would be??

 

I went ahead and crossed out the logical point in that comment, seeing as GM wouldn't ever do it.

Edited January 23, 2015 by rmc523

[RichardJensen]

This is why de Nysschen is doomed to fail:

 

His idea behind the boutique stores — which has not been pitched to dealers yet — is to encourage some to invest in smaller, standalone showrooms featuring maybe two to five cars instead of Cadillac's entire lineup, de Nysschen said last week during an interview with The Detroit News. That would help bolster the brand and dealer profitability, he said.

 

 

 

He's talking about 'encouraging' dealers.

 

Well, it's like this:

 

If these 'boutique' stores really will bolster dealer and brand profitability, then one or both of the following would be taking place:

 

1 - GM would be voluntarily committing financial incentives to promote these renovations, because it will benefit their bottom line.

 

2 - Dealers would be lining up to make these changes because it will benefit their bottom line.

 

Instead, the business case for these significant alterations is at best murky, therefore de Nysschen is talking about, basically, talking. And nothing else.

[jpd80]

This is why de Nysschen is doomed to fail:

 

 

 

He's talking about 'encouraging' dealers.

 

Well, it's like this:

 

If these 'boutique' stores really will bolster dealer and brand profitability, then one or both of the following would be taking place:

 

1 - GM would be voluntarily committing financial incentives to promote these renovations, because it will benefit their bottom line.

 

2 - Dealers would be lining up to make these changes because it will benefit their bottom line.

 

Instead, the business case for these significant alterations is at best murky, therefore de Nysschen is talking about, basically, talking. And nothing else.

I wonder how all of this plays with state franchise laws, I'm pretty sure that there's protection against manufacturers

that fry to pressure dealerships to do things that may be considered restrictive to their business..

[akirby]

I wonder how all of this plays with state franchise laws, I'm pretty sure that there's protection against manufacturers

that fry to pressure dealerships to do things that may be considered restrictive to their business..

 

They can't be forced to do anything, which is why nothing will happen unless GM rewards the dealers financially for their investment.

 

And anyone that thinks spending big bucks on a stand alone dealer showroom, then only selling 2-5 vehicles instead of all of them will provide better profit is an idiot.

[LincolnV]

I've been trying to find out how many Lincoln dealers Ford has. The last article I read from 2012 is that there were now around 325 in Metropolitain areas - down from 500. I seem to remember that reducing the number of Lincoln dealers was an expensive undertaking.

 

Some of what is going on with Cadillac reminds me of Ford's Premier Automotive Group efforts 15 years ago when they brought in that BWM executive to lead the division. That didn't last long.

[grbeck]

Just when you thought it couldn't get any worse.......

 

Let's create a tiny showroom with only 2 vehicles, then add touch screens to look at the ones that aren't there.

 

I've run out of words.........

It's almost as though he's trying to recreate the custom-body cars of the 1920s and 1930s. Customers would order a body through the dealer, and then select the paint colors, upholstery patterns and interior trim pieces offered by the coachbuilder. Customers couldn't see the car in the showroom because they were ordering something that really was "one of a kind." But it's no longer 1929...

[akirby]

It's almost as though he's trying to recreate the custom-body cars of the 1920s and 1930s. Customers would order a body through the dealer, and then select the paint colors, upholstery patterns and interior trim pieces offered by the coachbuilder. Customers couldn't see the car in the showroom because they were ordering something that really was "one of a kind." But it's no longer 1929...

 

You can still do something similar like Lincoln is doing with Black Label. But you still need actual vehicles for buyers to see and test drive before they customize their order.

[chucky2]

The larger more entrenched problem with Caddy and Lincoln is that they just aren't seen by the larger public as the premium brands of their parent company any longer - for the most part they're simply an expensive trim level that has a price tag putting them into competition with brands that really are perceived in this day and age with a Premium moniker and thus justifying Premium pricing, i.e. BMW, Mercedes, Audi, Land Rover, perhaps Volvo. Sure Caddy has the lumbering Escalade that fills the large SUV niche nicely, but after that, what do these brands really offer at the premium price point other than past prestige notoriety when they really were the US Premium game in town? Not much. Dumping Billions into brands that aren't really even seen as true premium anymore just for the sake of nostalgia doesn't really seem all that smart to me when those funds could go towards the betterment of their existing bread and butter line.

[rmc523]

De Nysschen is at it again further throwing dealers under the bus. I took this quote from the article in the performance SUV thread:

 

 

“It is illogical to assume that McDonald’s could deliver a fine French dining experience even as much as they might try, and that same philosophy is when you are an auto dealership,” de Nysschen said. He said when dealerships are geared around meeting the needs of mainstream customers, it it unrealistic that when a prospective Cadillac buyer walks in, “you can just change gears and take it to a new level.”