Is Cadillac's real problem the Koreans?

[12,000 RPM]

Interesting perspective from that place I dare not name.

http://carbuying.jalopnik.com/cadillacs-problem-isnt-the-germans-its-the-koreans-1694749647/

It's no secret that Cadillac, the self proclaimed "standard of the world," is struggling right now as a luxury automaker. Cadillac CEO Johan de Nysschen said it will cost $12 billion to turn the brand around in order to face the Germans, but are they going after the wrong targets?

Cadillac is about to debut the all new CT6 sedan in an attempt to once again make their car just as "desirable" as an Audi, BMW, or Mercedes. But it probably won't matter to your average luxury car buyer. Ask most folks who can actually afford a 5-Series or an E-Class what they think of Cadillac and you will find the main issue is not quality, or technology, or even performance...it's image. As of now the brand just doesn't convey the "status" of the European hardware. I realize that status is a shallow reason to select an automobile, but that is simply the reality of luxury car market.

Which brings me to the next problem, for those that can look past the badge Cadillac doesn't offer the "value" that the less-superficial shoppers are aiming for. I recently helped a client get a deal on a brand new 2015 Hyundai Genesis 3.8. I was shocked at how aggressive Hyundai is being with these cars in order to grab a foot-hold in the luxury market. Not only is the Genesis priced with a starting MSRP of $38,000 compared to the CTS that starts at $45,100 or the benchmark BMW 5-Series ($49,950), but Hyundai is also piling on the discounts to make a sale.

My customer wanted a base Genesis 3.8 without any packages, as he was very satisfied with all the standard equipment. Dealerships in California were willing to discount the sticker price down to a little over $34,000. So for about the price of a loaded V6 Camry you can have a rear-wheel-drive, luxury sedan with 311 horsepower (more than the 528, A6 2.0T, and CTS 2.0T), with standard navigation, heated seats, Bluetooth, and plenty of other goodies.

If my customer wanted to lease, the deal was even sweeter. After all the discounts and incentives were tallied up, the dealer offered a lease payment of $307/mo for 36 months and 10,000 miles per year, with only $1000 down. Compare that to Cadillac's offer of $449/mo for 36 months at 10,000 miles per year with $4349 down payment, and this is for a $45,ooo CTS. Now when you look at BMW's current lease special for a 528i with an MSRP of $52,700, the numbers are $499/mo for 36 months and 10,000 miles with a $4294 down payment. When you do the math it is hard to rationalize the CTS, regardless on how good it may be to drive.

Aside from the price difference, I was also quite impressed by the dealership experience from Hyundai. Not long ago I criticized them for sticking to "old ways" and made the point that you can't sell a $40k luxury car like a $15k compact. It seems that many Hyundai dealers woke up, and altered their approach to high-end sales. Almost every dealership I contacted was not only receptive, but gave me prompt responses with offers in writing. They understood that luxury car buyers especially don't want to "play games" and prefer quick sales with professional salespeople. The Hyundai dealers delivered, while even de Nysschen admits that Cadillac's dealer network could use some improvement.

Cadillac is facing a battle on two fronts. On the one hand, you have Hyundai and Kia offering less expensive alternatives for buyers that are less "badge conscious." On the other hand, Cadillac sees itself as on-par with the tier one players like Mercedes and BMW, but despite some really solid efforts just can't manage to steal customers away. Cadillac was once a luxury car to aspire to. There was a time when if you drove a Caddy, you were somebody (most likely a member of organized crime). Therefore, from a historical and philosophical standpoint it would be difficult for them to look "down-market" and fight the value brands like Hyundai and Kia head-on.

However, the "hearts and minds" battle that Cadillac has been desperately fighting, for the past decade or so, is not paying off. It won't matter how much power the CT6 can throw down or how light it is, to the average person just looks like a bigger CTS. It isn't going to save the brand. This war isn't won in the showrooms or the spec-sheet. People want to feel like they are getting more (or at least the same) for less. With Cadillac the perception is "less for the same cost." So either the brand needs to meet its value minded customers where they are, at lower price points, or their next project needs to be some kind hypnotizing device that alters the mindset of luxury car buyers.

Interesting about the $12B figure. Lets do some quick financial analysis. Caddy is selling about 140K cars are year in the US that aren't Escalades. Lets say they up that to 200K/yr with this revamp. OK. Lets also say by the grace of God they are able to make the ~20% or so profit margin that is the norm for Ze Germans on each one, at an average invoice of ~45K with no incentives (which is a far cry from where they are now). .2*45000*200000 = $1.8B- IF everything goes ABSOLUTELY PERFECT- i.e. they boost volume AND up their transaction prices essentially to that of the German equivalents. Thats more than a 6 year payback.... would u call that smart?

Meanwhile if they used the Malibu n Impala with aggressive PHEV powertrains, sharp styling and high content value, they could probably make that same 2 billion in profit annually for a lot less money. A whole lot less.

The comparison to the Genesis shows how out of whack Cadillac's value proposition is. If u dont care about brand, and by and large people who buy Cadillacs don't, why buy an ATS/CTS over a Genesis?

[2o6]

Because the genesis looks like ass.




Cadillac should be design focused.


The Hyundai isn't.

[SVT666]

Yeah, the front of the Genesis is hard to look at.  It's not a pretty car at all.

[12,000 RPM]

Fair point but Cadillacs today are designed so u cant find em in a parking lot. Plus thats easily fixed.

Like I've said before I totally agree that Caddy should be design focused. There is a real dearth of style in the luxury realm, though to be fair MB is showing flashes of it with the new C and S. Definitely looking forward to the new E.

[hotrodalex]

Cadillac should be a Mercedes competitor, not as much focused on the BMW or Audi cars.

[FlatBlackCaddy]

I don't think cadillac can ever be "turned around" and reach a point of being truly on par(image wise) with the germans.

So really, what's the point? I mean if GM is making cash off the deal then thats fine but if it's a money loser they might as well just cut and run instead of throwing good money after bad.

While I'm saying that, I think ford should take that advice as well with the lincoln brand.

The way cars are being built(options) and the higher the sticker prices get(you can spend 40K at ford or chev) there is no reason not to cut away the dead luxury brands and move to a more "middle ground" premium mainstream type of brand. For example, Chryslers latest designs and their big jump on interior design and quality can almost make the buyer feel that they are buying a "premium" car even though it's just a mainstream manufacturer. It isn't as far fetched as some would believe. I think many would be surprised hopping in between a loaded 300C and the sts(or cts, or whatever their mid/large v8 model is, do they have a v8 model?).

[r0tor]

Its a shame that Lincoln is making better strides in the market by just dressing up Ford products then Cadillac is with focused approaches in the segment.

Maybe Ford realized why bother going after the Germans when a German buyer won't buy your product because of sheer brand prestige.

[FlatBlackCaddy]

Its a shame that Lincoln is making better strides in the market by just dressing up Ford products then Cadillac is with focused approaches in the segment.

Maybe Ford realized why bother going after the Germans when a German buyer won't buy your product because of sheer brand prestige.

Lincoln is just dressing up fords and slapping a few grand extra profit on top. Which from a business standpoint is fine, since they are just building cars to make money.

[hotrodalex]

Its a shame that Lincoln is making better strides in the market by just dressing up Ford products then Cadillac is with focused approaches in the segment.

Maybe Ford realized why bother going after the Germans when a German buyer won't buy your product because of sheer brand prestige.

Uh, what? Lincoln is still a joke.

[GoCougs]

Maybe that guy should stick to selling Hyundais ...

The CTS and SRX were big successes for Cadillac. The ATS less so but still successful. The Escalade is a unique thing but it too is by the numbers successful. I have no idea about this CT6 but that segment is so small who really cares.

Audi, BMW and M-B are much larger corporations with global presence - Cadillac has never been that and I don't think they want to be that. With 4-7 year model cycles it takes a long time to resurrect a brand, and Cadillac is doing it about as fast as possible.

[2o6]

I still think the CTX nomenclature is absolutely horrible.

[hotrodalex]

I still think the CTX nomenclature is absolutely horrible.

Names have much more H&H unless you're a German. Americans and Japanese need to realize this immediately and stop the BS.

[shp4man]

Yet another sign this country is going to hell. A Korean shitbox is better than a Caddy? Jesus...

[68_427]

The new ct6 has an optional 34 speaker stereo

[ifcar]

So you criticize Cadillac for focusing on something that Hyundai is far from mastering -- engaging handling -- and then say "OMG Hyundai is cheaper!" Can't different automakers focus on different things?

[r0tor]

Uh, what? Lincoln is still a joke.

They are deeply digging into Cadillacs sales

[12,000 RPM]

So you criticize Cadillac for focusing on something that Hyundai is far from mastering -- engaging handling -- and then say "OMG Hyundai is cheaper!" Can't different automakers focus on different things?

The Genesis is a 4400 lb sedan..... its focus is not engaging handling, and in any case engaging handling is irrelevant to the luxury market. If it wasnt the Caddy would be a success.

Maybe that guy should stick to selling Hyundais ...

The CTS and SRX were big successes for Cadillac. The ATS less so but still successful. The Escalade is a unique thing but it too is by the numbers successful. I have no idea about this CT6 but that segment is so small who really cares.

Audi, BMW and M-B are much larger corporations with global presence - Cadillac has never been that and I don't think they want to be that. With 4-7 year model cycles it takes a long time to resurrect a brand, and Cadillac is doing it about as fast as possible.

Yea, were. The OG CTS + SRX were the cars that turned Cadillac from an ancient relic and complete joke to a semi-luxury brand kinda worth considering spending money on for cars. But Caddy def wants to be a global brand, and nothing they can do will get them there.

"George, do you know why you failed?"
"Because... because I got caught"
"No George. You fail... because you have the wrong dream. Tell me George... what do you know about cocaine?"

Its a shame that Lincoln is making better strides in the market by just dressing up Ford products then Cadillac is with focused approaches in the segment.

Maybe Ford realized why bother going after the Germans when a German buyer won't buy your product because of sheer brand prestige.

This is exactly what it comes down to. An American car selling for more than $40K in high volume is a pipe dream. That's truck territory. Trucks carry the status to demand those prices.... store brand 3/5 series dont.

CT6 shows they still dont get it. Who cares how light these cars are?

Caddy has the wrong dream. They will never be able to fight with the Germans. ATS was a huge mistake, as good as it is. Alpha platform banking on ATS/CTS succeeding was a huge mistake. They need to go the Lincoln route, but also leverage their techs and heritage. There is nothing Cadillac about the ATS/CTS

[hotrodalex]

I can't take someone seriously if they put Lincoln on a pedestal while blasting Cadillac.

[2o6]

Lincoln is garbage.



They don't make a single product worth a damn, except maybe the MKC and MKZ.

[12,000 RPM]

Lincoln's cars aren't great, but then they don't have to be. Warmed over Fords are low risk, low cost, high profit endeavors. And heres the funniest part. You scoff at Lincolns, but on average a new MKZ is trading hands at a higher price than an ATS. It's also generally selling above invoice, while the ATS is selling at about $1500 under. And as of 2014 the MKZ is outselling the ATS too, at least in the US. So how can Lincoln be "garbage" when people are willing to pay more for a Ford Fusion XLE V6 than a Nurburgring tuned new from the ground up ATS? MKZ has higher content value, a bigger back seat, and for the money better performance. If you don't care about dynamics, and most people don't, what is the case for buying an ATS over an MKZ? An MKZ!!!!!

I know it hurts to hear because the ATS is a car for "us". It's a car we are supposed to like. It's a good car, and on the strength of where Caddy was 20 years ago it deserves to win. But you guys are missing the bigger picture, just as GM did. GM is in the business of selling cars, not appeasing internet enthusiasts. And as good as the ATS/CTS are, they are not good in the ways that matter to luxury buyers. Even the people buying them are taking them at steep, steep, steep discounts. The fact that the MKZ is outselling it more profitably at higher transaction prices speaks to what I've been saying all along- people want style, content, room and adequate performance.... not whatever the fuck Cadillac is trying to do.

[ifcar]

Lincoln is garbage.



They don't make a single product worth a damn, except maybe the MKC and MKZ.

So, garbage except for its No. 1 and No. 2 best-selling vehicles, which combined made up more than half of the brand's sales so far this year, and which are also its only two relatively new products yet on sale?

[SVT32V]

I think sporty is coming at this as a guy that traded a good performance car for a plebeian sedan, so this is his insight. He has a point, gushing car-rag articles about ats dynamics isn't going to do much to persuade the young professional that would normally buy an automatic, base, 3-series that the caddy is more desirable.

I have to say I have noticed seeing a number of MKZ-hybrids popping up in the professor parking lots here at the university. This in a sea of bmws/audis/mercedes, I can't think of ever seeing single caddy. The hybrid thing seems to be a selling point.

[GoCougs]

Lincoln's cars aren't great, but then they don't have to be. Warmed over Fords are low risk, low cost, high profit endeavors. And heres the funniest part. You scoff at Lincolns, but on average a new MKZ is trading hands at a higher price than an ATS. It's also generally selling above invoice, while the ATS is selling at about $1500 under. And as of 2014 the MKZ is outselling the ATS too, at least in the US. So how can Lincoln be "garbage" when people are willing to pay more for a Ford Fusion XLE V6 than a Nurburgring tuned new from the ground up ATS? MKZ has higher content value, a bigger back seat, and for the money better performance. If you don't care about dynamics, and most people don't, what is the case for buying an ATS over an MKZ? An MKZ!!!!!

I know it hurts to hear because the ATS is a car for "us". It's a car we are supposed to like. It's a good car, and on the strength of where Caddy was 20 years ago it deserves to win. But you guys are missing the bigger picture, just as GM did. GM is in the business of selling cars, not appeasing internet enthusiasts. And as good as the ATS/CTS are, they are not good in the ways that matter to luxury buyers. Even the people buying them are taking them at steep, steep, steep discounts. The fact that the MKZ is outselling it more profitably at higher transaction prices speaks to what I've been saying all along- people want style, content, room and adequate performance.... not whatever the fuck Cadillac is trying to do.

So what exactly are you doing then? In 2014 Cadillac almost tied Audi and still outsold Acura, Infiniti, and WAY more than Lincoln (171k vs. 94k).

Cadillac has no competition from Lincoln other than the Navigator (vs. Escalade) and MKS (vs. XTS) and the Cadillac cars are both better and sell better, and unlike Lincoln, Cadillac has unique cars (save for the Escalade) and world class performance variants.

I will say the Lincoln Continental concept looks cool but they screwed it with the motor.

[SVT666]

Lincoln is garbage.



They don't make a single product worth a damn, except maybe the MKC and MKZ.

Not a single one?  Then you name two?

As far as I'm concerned, they make one really good product. The MKZ.  Outside of that, Lincoln's lineup is feeble at best.

[12,000 RPM]

I think sporty is coming at this as a guy that traded a good performance car for a plebeian sedan, so this is his insight. He has a point, gushing car-rag articles about ats dynamics isn't going to do much to persuade the young professional that would normally buy an automatic, base, 3-series that the caddy is more desirable.

I have to say I have noticed seeing a number of MKZ-hybrids popping up in the professor parking lots here at the university. This in a sea of bmws/audis/mercedes, I can't think of ever seeing single caddy. The hybrid thing seems to be a selling point.

Good grief. I am riding my motorcycle in to work today and I spent about an hour yesterday playing racing games with my Fanatec wheel setup. I'm not out of touch all of a sudden because I have a Z. The people who just don't understand how a car like the ATS could fail are the ones who are out of touch.

Cougs Imma get at u in a minute dawg I gotta make my workout elixirs and hit the road.

[r0tor]

I can't take someone seriously if they put Lincoln on a pedestal while blasting Cadillac.

Lincoln sales were up 15% last year, Cadillac down almost 10%.

Not saying its fair or justified, but a whole lot more effort is being put into Cadillac to achieve the sales figures of dressed up Fords.

[MrH]

Interesting perspective from that place I dare not name.

http://carbuying.jalopnik.com/cadillacs-problem-isnt-the-germans-its-the-koreans-1694749647/

Interesting about the $12B figure. Lets do some quick financial analysis. Caddy is selling about 140K cars are year in the US that aren't Escalades. Lets say they up that to 200K/yr with this revamp. OK. Lets also say by the grace of God they are able to make the ~20% or so profit margin that is the norm for Ze Germans on each one, at an average invoice of ~45K with no incentives (which is a far cry from where they are now). .2*45000*200000 = $1.8B- IF everything goes ABSOLUTELY PERFECT- i.e. they boost volume AND up their transaction prices essentially to that of the German equivalents. Thats more than a 6 year payback.... would u call that smart?

Meanwhile if they used the Malibu n Impala with aggressive PHEV powertrains, sharp styling and high content value, they could probably make that same 2 billion in profit annually for a lot less money. A whole lot less.

The comparison to the Genesis shows how out of whack Cadillac's value proposition is. If u dont care about brand, and by and large people who buy Cadillacs don't, why buy an ATS/CTS over a Genesis?

If he plans on dumping $12 billion into Cadillac (which won't happen anyways), he would expect a whole lot more than 200k in annual sales.  6 years payback of sales (gotta consider that's actually more than 6 years, because you need a few years to develop prior) wouldn't fly.

[12,000 RPM]

So what exactly are you doing then? In 2014 Cadillac almost tied Audi and still outsold Acura, Infiniti, and WAY more than Lincoln (171k vs. 94k).

Cadillac has no competition from Lincoln other than the Navigator (vs. Escalade) and MKS (vs. XTS) and the Cadillac cars are both better and sell better, and unlike Lincoln, Cadillac has unique cars (save for the Escalade) and world class performance variants.

I will say the Lincoln Continental concept looks cool but they screwed it with the motor.

Me? I'm Monday night quarterbacking with a foam #1 hat and a beer hat.

Cadillac? Throwing good dollars after the bad.

Yea, the Escalade and XTS outsell the Navigator and MKS. But the MKZ outsells the ATS. Cadillac has no answer for the MKC which is in a hot growing segment. Most importantly though every car Lincoln has for sale makes money. Caddy is losing money on every ATS/CTS sold. GM will never recoup on the Alpha platform. What good is volume when you're giving cars away?

The biggest irony here is the most successful Cadillacs are the ones GM has invested the least in (Escalade and SRX). When it comes to domestic brands, luxury comes in the form of trucks. People will pay six figures for a truck no problem because the domestics have that brand equity. When it comes to cars nobody wants to spend more than $40-50K MAX on anything "imported from Detroit". Cadillac would have been wise to figure out how to make cars as profitable as possible at that price point than bet the house on $60K 4 banger CTSs nobody wants.

[SJ_GTI]

Well as a consumer I hope Cadillac keeps going in its current direction and simply keeps making its cars better and better. IMHO their strategy is better, long term (ie: 10-20 years) than the short term strategy of rebadging mainstreamers. IMHO doing that is what killed a lot of GM's brand equity in the 70's and 80's.

As a consumer I would take the ATS or CTS over any car being sold by Lincoln. So as a consumer, I like what Cadillac is doing.

[2o6]

The entire Buick brand outsells a lot of these makes.


Youre attempting to make Cadillac totally redundant.