The Cadillac Challenge
Making about as much power as a Corvette Stingray, the new Cadillac ATS V-Series sedan is a classic sleeper, the sort of car you might not even notice as it pulls up alongside at a stoplight—until it leaves you sitting there in a cloud of tire smoke after the light turns green. That could be particularly embarrassing if you happen to be driving the latest BMW M3, the benchmark of the compact luxury performance market, and the prime target for the new ATS-V.
Making its debut at the recent Los Angeles Auto Show, Cadillac's new performance sedan—along with its near-twin coupe—is the latest in a series of new models that General Motors' flagship brand plans to bring to market over the next few years, a product blitz that will reach from the lowest end of the luxury spectrum all the way up to the lofty luxury market where it's gunning to challenge the likes of the reference standard Mercedes-Benz S-Class.
It wasn't all that long ago that Cadillac liked to boast of being the "standard of the world," a slogan spawned by its victory in the 1908 Dewar Trophy, where it demonstrated the interchangeability of its components. For decades, that sobriquet proved true. Cars like the finned '59 Cadillac Eldorado served as the very definition of luxury style and features. But in recent years, the 112-year-old Cadillac has had a tough time living up to that claim. Few see it as the industry benchmark. Indeed, the brand isn't even available in many parts of the world, while in the U.S. market, Cadillac has slipped into second-tier status behind the likes of Mercedes-Benz, BMW and Japanese upstart Lexus.
It's not that Caddy hasn't tried...and tried...and tried again. The maker has launched a number of well-reviewed new models over the last decade, including a bold bid to reclaim its design leadership with the introduction of the first-generation CTS sedan, in 2002. It brought to market the dramatic Art & Science design "language" that put a fresh and modern twist on the finned Caddies of the '50s. The base ATS, added 11 years later, was quickly hailed as perhaps the first compact model to give the BMW 3-Series a real chase for the money when it comes to performance and handling. Even so, with demand trailing expectations, Cadillac became one of the few brands to see its sales slide during the 2014 model-year.
"They're not connecting with consumers and getting on their shopping lists," says Stephanie Brinley, senior auto analyst with the consulting firm IHS Automotive. The irony, she adds, is that "People still use the name Cadillac as a definition for the best something can be. But the brand no longer means that to a lot of people. It's lost its relevance."
How to make it relevant again is the challenge facing Johan de Nysschen, Cadillac's new global chief executive. He spent the better part of a decade helping rebuild the Audi brand in the U.S. market before moving to Hong Kong as CEO of Nissan's own second-tier luxury brand, Infiniti. The South African-born de Nysschen was personally recruited by the GM president and second-in-command Dan Ammann and, according to well-placed sources, given a near-open checkbook. He'll clearly need it.
The new Cadillac boss has seldom been shy about making big changes, and rumors began to fly even before he officially moved into his new office at GM headquarters in Detroit's Renaissance Center over the summer. As it turns out, he won't be there for long. Cadillac is set to decamp for new digs in Manhattan. "We want to put a little distance between Cadillac, as a brand, and the rest of the brands in the General Motors stable," de Nysschen says. "Relocation isn't an end to itself," he quickly adds, explaining that, "if you don't change the way you do business, all you do is add an order of complexity to your business."
The move has stirred up plenty of controversy, especially at a time when the City of Detroit is emerging from bankruptcy and looking to lure jobs back downtown. In practice, de Nysschen says, less than 100 Cadillac employees will be moved to New York, largely those in sales, marketing and advanced research—the better to be in touch with the sort of high-end, trendsetting luxury buyers it craves. If anything, he promises, a successful Cadillac will expand its remaining Michigan workforce, especially in design and engineering. The reality is that three things matter in the automotive industry: product, product, product, or so goes the old adage. And that's where that open checkbook is going to prove critical.
There was a time when luxury brands sought exclusivity above all else, even if that meant shutting the door on some potential buyers. No longer, as Mercedes has demonstrated with a rapidly expanding lineup that will soon stretch from the under-$30,000 CLA to the topline S600 Pullman limousine that, in some configurations, will top $1 million. While Mercedes has confirmed plans to add 30 new or updated models by 2020—rivals BMW and Audi are making similar moves—Cadillac has continued trying to subsist on a handful of products. But that's about to change. As part of its global restructuring, the General Motors luxury division intends to unleash an unprecedented product assault aimed at catching up to its German rivals. Much of it will target the so-called "white space" Cadillac has never touched before. But whether it can keep pace with its European rivals remains to be seen.
The new ATS V-Series is the first of the new products, and development was well under way by the time de Nysschen returned to the U.S. from his Infiniti post in Hong Kong. Unlike Cadillac's past performance models, which were all V-8s, the compact sedan opts for a downsized twin-turbo V-6—more in line with the latest European trend seen with models such as the nearly as new BMW M3. In fact, the Caddy sedan will make more power than its Bavarian rival.
Next up, Cadillac will add a V-Series version of its bigger CTS sedan.That model will stick with a V-8 and is expected to pack significantly more of a punch than the outgoing CTS-V, which churns out 556-hp from its supercharged 6.2-liter engine—enough to hit 60 in 3.9 seconds. It will need the power to maintain that number because the new CTS is bigger than the old sedan.
Performance cars don't generate huge sales numbers, but they do serve up a welcome halo, notes analyst Joe Phillippi, of AutoTrends Consulting. And that's critical when you're trying to rebuild a brand like Cadillac. Indeed, Lexus, Infiniti and Jaguar have also been expanding their performance lineups in hopes of adding more ion to their own brand images. Luxury leaders BMW and Mercedes have carefully cultivated their own performance lines and now offer M and AMG variants, respectively, of virtually every model they build.
Along with the new V-Series models, Cadillac will target more mainstream luxury segments. And, as with its German rivals, that will mean moving even more down-market than the ATS. At the low end, de Nysschen says there "definitely" will be a new entry-luxe line to rival the hugely successful new Mercedes CLA and Audi A3 models. This is a "must-have" if Cadillac hopes to target the Millennials that are just moving into the luxury market but who will soon dominate the segment, stressed Baby Boomer de Nysschen.
Also essential will be filling out the brand's currently minimal mix of utility vehicles, today limited to the midsize SRX crossover and more traditional, full-size Escalade SUV that was redesigned for 2015. "We need a crossover between SRX and Escalade," explains de Nysschen, along with something below the SRX. He also suggests there could be a "more complex crossover," akin to the new Audi A1, so Cadillac would likely have "three more (utility vehicles) than today," by the end of the decade.
As are its German rivals, Cadillac is frantically searching for new niches in which it hasn't traditionally competed. It could soon add "coupes and convertibles...and a number of performance cars" that, de Nysschen says, would expand the current V-Series lineup even further. Few would be surprised if Cadillac comes back with a true sports car to compete with the likes of the new Mercedes-AMG GT and Audi R8, or something a bit lower on the price spectrum to target the BMW Z4 roadster and Porsche Cayman and Boxster models.
Cadillac is also determined to rebuild its presence in the side of the luxury market, a brand-defining niche it has been absent from for a number of years. Not that it hasn't tried to find the right formula with a series of stunning concept vehicles such as the massive, and somewhat retro Cadillac Sixteen sedan, and the more recent Ciel convertible. It may finally have found the right magic with the Elmiraj prototype that made a crowd-pleasing debut at the 2013 Pebble Beach Concours d'Elegance, continuing to wow crowds on the auto show circuit the following year. Its curvaceous interpretation of the previously angular Art & Science design language is expected to have a strong influence on the new topline sedan that GM CEO Mary Barra recently confirmed. And de Nysschen says Caddy will stretch even further upmarket, hinting that, "I quite readily envision a Cadillac positioned above the car we'll be launching next year."
The vehicle making its debut at the 2015 North American International Auto Show in Detroit will be called the CT6, with the bigger model likely to be christened the CT8. Going forward, all new Cadillac models will follow that nomenclature, a debatable approach that is nonetheless in line with the naming strategies used by the dominant European brands.
If anything, de Nysschen seems to court controversy. Even as Cadillac struggles to reverse this past year's sales decline, he has taken steps to raiseprices and reduce incentives, arguing that, in the long run, Cadillac cannot rebuild its image if it acts like a bargain brand. In an interview, he says he would be quite willing to accept several more years of slow sales in the U.S. market while that new positioning strategy takes hold. Of course, it would help if Cadillac could offset a decline at home by gaining ground in other markets.
The division has made a number of half-hearted attempts to enter the European market over the past two decades, showing little in the way of results. The bigger opportunity now appears to be China, which is expected to be the world's largest luxury market within the next several years. Cadillac recently began manufacturing its big XTS sedan at a plant in Shanghai. Eliminating hefty import tariffs has helped boost the brand's volume from around 50,000 in 2013 to an anticipated 70,000 for all of 2014. De Nysschen forecasting the figure will reach 100,000 in 2015. That said, Cadillac still will lag well behind China's luxury leader Audi, and other key European brands.
Catching up will require not just more products, but models specifically attuned to the booming Asian market, stresses AutoTrends Consulting's Phillippi. That will likely include stretched versions of the latest CTS and the CT6—reflecting the fact that Chinese luxury buyers prefer sitting in the back seat, leaving the driving to their chauffeurs. The good news is that some of those long-wheelbase models will almost certainly find ready buyers in the U.S. market, as well.
Luxury makers, in general, face a conundrum these days. Leather and wood, those traditional hallmarks of an upscale automobile, can now be had on plebian products that sell for half the price of a Cadillac CTS or Audi A6. So, how do you continue to convince buyers to invest tens of thousands of dollars more for a car with a Mercedes tri-star, BMW spinner or Cadillac crest on the grille? Technology has become a critical differentiator. The new Mercedes S-Class is a high-tech showcase, with features like infrared night vision, a "magic" suspension that uses machine vision to adjust its ride to road conditions and a collision detection system that can come to a complete stop if a car, pedestrian or large animal walks into your path.
Cadillac has been trying to build a similar reputation for cutting-edge technology, though it has had a misfire with the slow and awkward Caddy CUE infotainment system that debuted on the XTS sedan several years ago. Moving forward, the brand hopes to take a leading position in autonomous driving. It plans to add a system called SuperDrive on the CT6 which will allow hands-free driving on limited-access highways, starting in 2017. It also plans to add so-called vehicle-to-vehicle, or V2V, technology on the CTS, about the same time. That will allow cars to "talk" to one another, alerting motorists to traffic tie-ups, crashes and weather problems. The federal government is preparing to set up a smart highway test on about 100 miles of Detroit-area freeways. "No other suite of technologies offers so much potential for good and it's time to turn potential into reality," GM CEO Barra said during a keynote speech at the annual Intelligent Transportation Systems World Congress in Detroit last September.
Turning potential into reality is, in the end, the theme for Cadillac itself. And it won't be a cheap goal to achieve. GM officials won't discuss the price tag for all of the brand's product plans, but it is expected to run into the many billions of dollars. The maker has confirmed it will spend $400 million just to upgrade the Detroit assembly plant that will start producing the CT6 sedan next year (though that figure will cover improvements needed to produce models for other brands, as well). But de Nysschen insists that GM cannot afford to back down on what he calls "an investment in generating the future profitability for the corporation." Luxury products for just 10 percent of global car sales, he points out, but they generate as much as half of industry profits for many manufacturers. The executive describes its lineup as totally "U.S.-centric." With Cadillac pressing into China and other overseas markets, its future product mix will have to be far more diverse and extensive if the brand ever hopes to live up to its longtime motto as "the standard of the world."
Paul A. Eisenstein is publisher of the website The DetroitBureau.com.
