Cadillac, in an acknowledgment that it lacks fresh products, will weigh customer-satisfaction scores and compliance with brand standards more heavily than sales volumes when determining U.S. dealer bonuses for 2018.
The brand also will not give dealers sales targets for individual nameplates.
"Many" dealerships have fallen short of their targets this year, Cadillac President Johan de Nysschen told Automotive News. He attributed the shortfalls to Cadillac's sedan-heavy lineup, relatively flat sales of luxury vehicles overall and the brand's more disciplined use of consumer incentives.
"They sold fewer cars than in the prior year, but on top of that, by not qualifying for the sales bonuses, many of them also made less profit on each car they sold," de Nysschen said in a recent interview.
Cadillac informed dealers of the changes this week. The payouts are part of the brand's incentive program called Project Pinnacle, which began in April. Cadillac is putting $800 million into Pinnacle, which it developed as a means to make its dealership network more on par with those of Mercedes-Benz, BMW and Lexus.
"It's an important improvement and one that reflects the spirit of what we're trying to achieve, by saying that dealers who perform need to be in the money," de Nysschen said. "I absolutely believe that dealer profitability is a precursor and an essential requirement for a strong franchise, and a strong franchise is necessary for Cadillac to be strong. Pinnacle's objective is to make dealers more profitable -- provided they perform."
He noted that compliance with brand standards is a metric that dealers can control, whereas sales are subject to more external variables. Cadillac plans to begin a "product offensive" in late 2018, starting with the XT4 small crossover and continuing with another new vehicle about every six months through the end of 2020.
Cadillac's lineup currently comprises the Escalade large SUV and four sedan nameplates but only one crossover, the midsize XT5. The XT5, introduced in early 2016, has outsold the four sedans combined this year. By 2022, Cadillac is expected to have four crossovers and only three sedans, plus the next-generation Escalade.
Through November of this year, the brand's U.S. sales are down 5 percent overall and 7.8 percent on a retail basis. De Nysschen said the decline was not a surprise given that new products are still almost a year away but that it has been compounded by weaker-than-expected demand across the luxury market, with five of the six largest brands posting lower sales.
He said Cadillac has avoided trying to compensate with widespread, profit-killing discounts as it often did in the past.
"To use a metaphor, making the goose not only alive but vibrant and strong is far more important than losing a couple of eggs along the way," he said. "Losing a couple of eggs means walking away from bad business and seeing the impact on the sales scoreboard. It was anticipated, but it doesn't make it any more comfortable when that anticipation turns into reality."
He noted that Cadillac's average transaction price has risen 14 percent in the past two years, partially bacause of lower incentives and said sales have fallen "somewhere between 7 to 10 percent" because of that pricing discipline.