For GM, Help Is on the Way at Cadillac
DETROIT (TheStreet) - Cadillac, a languishing brand at which first-half sales fell by 18%, is about to get what it badly needs --- new cars.
The most important of them, the Cadillac ATS compact luxury sedan, is poised for its advertising debut a week from Friday, during the July 27 opening ceremonies of the 2012 Olympics. The ads will proclaim that the car's superior handling can meet the challenges posed by extreme driving conditions around the world, and will suggest they can also meet the challenges posed by luxury brands from Germany.
For this task, expensive Olympic first night advertising definitely seems the way to go because Cadillac needs a jolt.
June was Cadillac's best month of 2012, with sales up 12%. But for the first half of the year, sales of every single Cadillac vehicle declined, and the brand's market share fell by 25%. Overall GM
But help is on the way as GM seeks to rebuild Cadillac, its effort led by two new vehicles that are or will soon be showing up in dealerships. The new XTS sedan went on sale in June and, while just 753 vehicles sold, they sold rapidly. Edmunds.com said new cars sat in dealerships for just seven days, compared with an industry average of 55 days. Now comes the time for ATS, unveiled at the 2012 Detroit Auto Show.
Polk Analyst Tom Libby said the landscape for Cadillac is improving, although the competition from BMW and Mercedes Benz is tough and, at least in the short-term, probably insurmountable.
"The addition of both the ATS and XTS to the Cadillac car lineup marks a significant milestone in the evolution of the make," Libby wrote, in a recent blog. "For the first time in many years -- maybe forever -- Cadillac will simultaneously offer three competitive cars in the three core luxury car categories: compact, midsize and large.
"XTS volume will increase as availability improves, though the volume potential at the higher end of the luxury space is limited," Libby said. ATS, meanwhile, is "competing in the highest-volume luxury segment, luxury compact car (against) the segment-leading BMW 3-Series and Mercedes-Benz C-Class."
Karl Brauer, CEO of Total Car Score.com, recently drove the new ATS, and said that "GM has cracked the code on how to do this stuff.
"It might not quite be the 3-Series in pure driving dynamics, but we're talking shades of grey there," he said. "The difference is small enough that most people wouldn't even notice it. ATS is a hugely important car for GM, (whose) attitude is 'we're taking on the world,' and I think it's going to work."
ATS, in Brauer's view, can lead Cadillac out of the woods. The bigger XTS "is a good step in the process where they will one day have a very serious competitor" for Mercedes S-Class, he said. Escalade, a full-sized luxury SUV, "is plush enough and nice enough that people like it, but it still needs to be put onto a car platform" like the GMC Arcadia.
Meanwhile, Cadillac's CTS midsize luxury sports sedan, "is kind of a 'tweener' between BMW 3-Series and 5-Series," Brauer said. It could, in fact, be called a 4-Series. "It's successful as a tweener, but now it can evolve into something bigger because the ATS is the new 3-Series fighter," he said.
With just five vehicles once ATS arrives, Cadillac is obviously at a disadvantage in a luxury world where Mercedes has 15 vehicles, BMW has 10 and Toyota's
Looking ahead, Libby said "Cadillac's product renaissance" will continue with coupe and wagon versions of the ATS as well as a redesigned CTS and a redesigned Escalade. In 2014, an ATS cabriolet version and a CTS wagon both come to market, followed in 2015 by a new SRX and a redesigned CTS coupe.
Polk estimated the aggressive product introductions will drive Cadillac's share of the U.S. light vehicle market from 1.2% in the first six months of 2012 to 1.3% in 2013 and 1.4% by 2015. In 2015, BMW will have 2.4% of the market, Mercedes-Benz will have 2.1%, Lexus will have 2% and Lincoln will have 0.9%, the firm estimated.
Libby said Ford's
Cadillac's decline was probably inevitable given GM's decisions to delay or cancel product programs during its 2009 restructuring. "We are now seeing the ramifications of those changes," Libby said.
Not only does "Cadillac's current product portfolio not measure up to that of any of its major luxury competitors," but also the European manufacturers "enjoy and will continue to enjoy stronger, richer, and deeper luxury reputations, (following) decades of marketing consistency and discipline," he wrote.
BMW, Libby reminded, has been touting the same tag line -- "The Ultimate Driving Machine" -- for over 30 years. The new face of Cadillac will be shown next Friday night.
-- Written by Ted Reed in Charlotte, N.C.
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