GM Looks to Jump-Start Cadillac-Again

Written by:
Mike Colias
Wall Street Journal
May 13, 2019

Cadillac’s U.S. comeback has taken another detour.

General Motors Co. GM -1.87% has been trying for decades to revive Cadillac in the U.S. luxury car market, where it was once the standard-bearer but now is No. 5 in sales behind BMW , Mercedes-Benz, Lexus and Audi.

Cadillac’s latest reboot began a year ago with the installation of a new executive team, which has overhauled marketing and relocated its headquarters from Manhattan’s SoHo neighborhood to a Detroit suburb.

But there are few signs that Cadillac’s latest fresh start has sparked momentum. The brand’s share of the luxury market dropped to 7% in 2018 from 7.5% a year earlier, extending years of declines, according to the Automotive News Data Center.

Vehicle-quality ratings have lagged behind rivals, based on recent ratings from J.D. Power and Consumer Reports. And dealers say they are getting impatient with the sales slide as the value of their Cadillac dealerships has sunk to among the lowest of any brands, according to recent reports from dealership-advisory firms Haig Partners and Kerrigan Advisors.

Restoring Cadillac’s reputation as a luxury player is a goal that so far has eluded GM Chief Executive Mary Barra, who has led the auto maker to record profits during her five-year tenure and positioned it as a leader in advanced technologies like self-driving cars.

Most of the brand’s sales growth now comes from China, where it has expanded rapidly in recent years. But GM executives also are counting on Cadillac’s renewal in the U.S. to drive future profits and help it diversify beyond its big money-making trucks. GM last year said it wants to double Cadillac’s profits over four years through 2021, but didn’t disclose a number.

Cadillac in coming months is releasing two new models, part of a long-awaited product blitz to fill out its thin vehicle lineup. The new nameplates include a compact sedan, the CT5, and the large XT6 SUV, which will compete against the Audi Q7, BMW X5 and Lincoln’s forthcoming Aviator.

GM's new Cadillac XT6 SUV, presented at a media day during the Shanghai auto show in April. PHOTO: ALY SONG/REUTERS  

“The patient has a pulse,” Cadillac President Steve Carlisle said in an interview. “We’re getting increasingly excited about what we have in front of us.” He said internal measures show vehicle quality and dealer relations are improving.

Cadillac’s previous attempts to close the gap with luxury leaders in the U.S. haven’t yielded much success. In the early 2000s, Cadillac introduced better-handling cars with sharper angles and blocky forms, winning some praise from auto reviewers. But it shrank its lineup through the decade and fell further behind foreign rivals after GM’s 2009 bankruptcy.

In 2014, GM recruited Johan de Nysschen from Nissan Motor Co.’s Infiniti brand to boost Cadillac’s profile. The South Africa native was best-known for leading Audi’s surge in the U.S. from 2004 to 2012, and Ms. Barra touted him as the person who would engineer a decade-long rebuilding of Cadillac.

About Kerrigan Advisors

Kerrigan Advisors is the premier sell-side advisor and thought partner to auto dealers nationwide. The firm advises the industry's leading dealership groups, enhancing value through the lifecycle of growing, operating and, when the time is right, selling their businesses. Kerrigan Advisors has represented some of auto retail's largest transactions and advised more of the largest dealership groups in the US than any other buy/sell firm in the industry. Led by a team of veteran industry experts with backgrounds in investment banking, private equity, accounting, finance and real estate, the firm does not take listings, rather they develop a customized approach for each client to achieve their personal and financial goals. In addition to Kerrigan Advisors' sell-side advisory and capital raising services, the firm also provides a suite of consulting services including growth strategy, market valuation assessments, capital allocation, transactional due diligence, open point proposals, operational improvement and real estate due diligence.

Kerrigan Advisors monitors conditions in the buy/sell market and publishes an in-depth analysis each quarter in The Blue Sky Report®, which includes Kerrigan Advisors' signature blue sky charts, multiples, and analysis for each franchise in the luxury and non-luxury segments.—To download a preview of the report, click here.—The firm also releases monthly The Kerrigan Index™ composed of the seven publicly traded auto retail companies with operations focused on the US market. The Kerrigan Auto Retail Index is designed to track dealership valuation trends, while also providing key insights into factors influencing auto retail.—To access The Kerrigan Index™, click here.—To read the—2023 Kerrigan OEM Survey, click here.—Kerrigan Advisors also is the co-author of NADA's Guide to Buying and Selling a Dealership.

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