GM scrapped plan to reshape its Cadillac dealer network in the image of Lexus

To the sound of millions of General Motors Co. dealerships and customers breathing a sigh of relief, the carmaker has announced that it will no longer go through with a plan to cut the number of Cadillac franchises by two-thirds.

Previously, GM has said that it wanted to reshape its Cadillac dealer network similar to that of Lexus. This meant that from 1,422 dealerships on Jan. 1, 2009, there would only be about 500 left by the end of this year. This lean network would be similar to import luxury brands, which only require a few hundred dealerships that focus on coastal urban markets. Continued after the jump!

It’s becoming apparent that GM is reinstating dealerships to rebuild its small-town network. Automotive News interviewed several dealer representatives who said that 55 of their 75 clients that are to be reinstated are rejected Cadillac showrooms. A big number of those Cadillac dealerships are located in rural areas or small towns.

Ernie Manuel, president of the Fontana Group, a financial consulting firm for dealerships, believes that GM has realized that terminating these dealers would not lead to increased sales since many loyal Cadillac customers would be left orphaned. The 922 Cadillac franchises targeted for closure in the reorganization accounted for almost half of the 2,000 GM stores affected. Last year, GM planned to close 1,350 dealerships and another 650 franchises at dualed stores. Dealer lawyers and consultants said that since GM’s bankruptcy last June, the company has been pushing Cadillac sales in large metropolitan areas on the East and West coasts while closing dealerships in less populated regions.