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Sometimes, one can learn a lot about a company by looking at its rivals.
For instance, it has been clear for awhile that General Motors (NYSE: GM ) CEO Dan Akerson has been modeling his corporate overhaul on Ford's (NYSE: F ) remarkable turnaround, with some benchmarking of Toyota's (NYSE: TM ) global product strategy thrown in. Looking at how Ford's turnaround has played out (for instance) can give investors some idea of where GM's product strategy is likely to be going in coming years.
Now, I'm not saying that taking a cue from a rival is a bad thing. Ford's example is a good model for Akerson to be drawing from as he tries to get all of GM's disparate parts dancing in sync.
But I recently ran across a bit of data that suggested that Akerson might be taking a few cues from another automaker, cues that might explain why GM seems to be planning a big push for one of its oldest brands -- Cadillac.
Who might that be?
The rival in question is Volkswagen (OTC: VLKAY), which reported second-quarter earnings a couple of weeks back. VW's quarter was quite good -- almost $4 billion in operating profit. That's especially impressive for an automaker that relies heavily on the European market, where sales have been mired in a multi-year slump -- and where GM and Ford have both been losing hundreds of millions of dollars every quarter.
What's VW's secret? It's not Europe, but it's not too hard to find once you dig into the numbers. Strong marketing and good products are key, of course, but a big part of VW's success has to do with Audi, the company's luxury-car brand. Audi, which has been on the rise in markets around the world, accounted for 46% of VW's operating profit in the quarter, thanks to its global popularity -- and thanks to its 11.6% profit margin.
That's a huge margin by auto-industry standards. While Tesla Motors (Nasdaq: TSLA ) says that it hopes to get a 25% margin, that's normally the realm of elite small-volume brands like Porsche and Ferrari -- and not much else. Most of the big time global automakers consider a margin of 7% or thereabouts to be pretty good. GM could only muster a roughly 6% margin in 2011 -- and even that was enough to generate record profits.
Dan Akerson's a sharp guy, and I'm sure that Audi's success and margins haven't escaped his attention -- particularly when he looks at China, where Audi has had huge success in recent years, and where GM would love to see its market-leading position generate bigger profits.
Want to know why GM has been giving its ancient and somewhat tattered luxury brand so much attention lately? This is why.
The coming attempt to revive the Standard of the World
GM's efforts to revive the brand it once called "The Standard of the World" aren't new, but they've acquired a new level of seriousness since Akerson took over as CEO. While Cadillac's CTS sedan has been reasonably competitive with the German luxury brands since the current model's launch in 2008, other pre-bankruptcy Cadillacs were mostly just so-so. But GM made a shocking statement last summer with the debut of a super-opulent Cadillac concept car, the convertible Ciel.
The Ciel was clearly meant as a sneak peek at GM's plans for the brand, plans to take it sharply upmarket with cars that would be at least arguably worthy of its old tag line. Recent reports suggest that those plans are now under way: Automotive News said last month that GM management has signed off on a new rear-wheel-drive platform, called Omega, which would underpin a large, expensive "flagship" sedan for Cadillac -- and perhaps derivatives like the Ciel.
That news follows the recent release of the XTS, a high-tech version of the old-school big-barge Cadillac that was originally conceived way back in 2006, but was held up during GM's drain-circling period (and much revised since). Still, it has received pretty good reviews, as has the just-launched ATS, a small Cadillac that represents GM's first serious attempt at competing with BMW's (OTC: BAMXF) iconic 3-Series.
But the ATS is another program that began before GM's bankruptcy. The first Cadillacs hatched under current management are still a few years off.
Still a waiting game
Like the rest of GM, Cadillac is still a work in progress, and it will be several years before Akerson's full vision is tested in the marketplace. Akerson himself hinted last year that the XTS and ATS are intermediate steps that don't quite represent GM's long-term plans for the brand.
Cadillac's big flagship sedan is unlikely to appear before 2015. When it does, it'll be aimed squarely at the biggest, best cars from the likes of Audi, BMW, and Mercedes-Benz -- a corner of the market where GM's offerings haven't been taken seriously in decades. Will this upcoming car reveal GM's triumphant return to the pinnacle of the luxury market? And more importantly, will it help Cadillac generate the big margins Akerson surely wants to see? We'll find out.