Like Tesla, Cadillac Bets on Virtual Dealerships

Buyers walking into a Cadillac dealer in the near future could find an interesting thing on the car lot: nothing.

General Motors Co.’s luxury division has about three times as many U.S. stores as German luxury auto makers or Toyota Motor Co.’s Lexus, but sells only about half the volume. Short of steering around rigid state franchise laws and hammering out financial settlements to shutter stores, a plan is being hatched to convert a portion of Cadillac’s 925 stores into virtual dealerships that will be low on overhead and big on sophisticated technology.

In a somewhat unprecedented way of moving metal, Cadillac President Johan de Nysschen will this month begin looking for commitments from some store owners willing to set up showrooms where buyers can get a car serviced or learn about products via virtual reality headsets without getting behind the wheel. Driving off immediately with a new vehicle will be impossible because these stores won’t have inventory.

Virtual stores are a part of “Project Pinnacle," an extensive retail-strategy overhaul by Mr. de Nysschen first introduced to dealers a few months ago in closed-door meetings, dealers said. Hired by Chief Executive Mary Barra in 2014 to turn the struggling luxury maker around, Mr. de Nysschen is revamping the way the company compensates its dealers by rewarding them less on the basis of vehicles sold (an industry practice known as stair stepping) and more on the way those dealers mimic better performing luxury brands with perks such as free roadside assistance.

Company executives will solicit commitments during a roadshow that starts in June, traveling to about a half-dozen cities to win over dealers confused or even angered by a plan that could be seen as a way to force the smallest of dealers out of business, according to GM and several dealers. Mr. de Nysschen wants to know which of five tiers of dealers those store owners want to fit in, including whether some of the dealerships with the lowest volumes would be willing to go to tier 5, which is virtual.

Regarding virtual dealerships, a GM spokesman said Cadillac is working on the concept and researching technologies.