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Can Cadillac Really Compete With Mercedes and BMW?

The all-new 2014 Cadillac CTS is set to arrive at U.S. dealers this fall. Image source: General Motors.

General Motors (NYSE: GM  ) CEO Dan Akerson didn't know a whole lot about the auto business when he joined the auto giant's board in the wake of the company's 2009 bankruptcy. But it's clear that he's learned a lot since. One of the things he's learned is that automakers with strong global luxury brands make more money. That's because luxury cars, generally speaking, sell with fatter profit margins than regular cars.

Making more money is of great interest to Akerson these days. GM has been solidly profitable for a while now, but its profits haven't been as strong as Akerson and GM's shareholders would like. More to the point, they haven't been nearly as strong as those at GM's global peers Toyota (NYSE: TM  ) and Volkswagen (NASDAQOTH: VLKAY  ) , both of which have strong luxury brands: Toyota's Lexus and VW's Audi.

GM, meanwhile, has Cadillac. But more and more, this isn't your grandfather's Cadillac. GM is making a big push to turn Cadillac into a no-excuses global luxury-car contender.

A surprising product revival, with global aims
Recent Cadillac models, like the all-new CTS (shown above) that GM unveiled last month, have shown that GM is putting some deep thought and serious global sophistication into its once-tired luxury brand.

Gone are the tufted velour seats, pillowy rides, and white vinyl roofs of retirement-community Cadillacs of yore. The latest Cadillacs are serious luxury cars in the modern idiom, combining lush interiors with sporty handling -- and, increasingly, materials and build quality that rival the great German luxury brands.

One by one, the cars that Cadillac will need to be truly competitive with the likes of BMW (NASDAQOTH: BAMXF  ) are coming. Last year's ATS sedan was GM's first-ever serious competitor to BMW's much-lauded 3-Series -- and some reviewers were shocked by how well the ATS turned out.

Now comes the CTS, first shown in New York in March and expected to arrive at dealers this fall. Reviewers haven't had a chance to drive it yet, but it looks -- on paper and in the metal -- like another big step forward for the brand. Next up: The ELR coupe, a sporty and luxurious cousin of the Chevy Volt, and an all-new replacement for the big Escalade SUV, due next year.

After that, things could get very interesting. Rumors hint that GM has a series of big Cadillacs under development, to be built on a new rear-wheel-drive platform designed to match or beat cars such as the vaunted Mercedes-Benz S-Class. Those cars could start to appear by mid-decade, and at that point Cadillac could be ready to go head-to-head with the best in the world -- all over the world.

Meanwhile, GM is already laying the groundwork for that moment in other areas.

A new global organization for a very American brand
GM announced on Friday that it had promoted Don Butler, the well-regarded U.S. marketing chief for Cadillac, to a new position as vice president of Global Cadillac Strategic Development. In that role, GM said, Butler will "drive the next phase of Cadillac growth internationally, including new market development and strategic global planning."

GM also said it had hired Steve Majoros away from ad agency Campbell-Ewald to be Cadillac's global marketing director, reporting to Butler.

These moves may sound like the auto-industry equivalent of inside baseball, but they show that GM is preparing to make a big global push for its suddenly up-and-coming luxury brand.

What does "global" mean? It certainly means China, where Cadillac is a tiny presence now -- but where GM has said that it expects to have 10% of the luxury-car market by the end of the decade. That won't be easy, as the German "Big Three" of Audi, BMW, and Mercedes are already dominant players in China, with about three-quarters of the market. Bbut it's critical to GM's long-term goal of making more money out of its leading position in the world's largest auto market.

GM is also expected to make a significant push to establish Cadillac in Europe. That may sound like a futile mission, but GM Europe executive Susan Docherty said in February that GM's research suggests that "validation" in Europe may be key to wider acceptance in Asia.

So can Cadillac really compete with the likes of BMW?
I think the brand can get compete, given two things: patience, and cars that are That Good.

Akerson isn't known for his patience, but the GM executives leading the Cadillac revival have been careful to speak in terms of long-term goals. I think the company is willing to give this effort the time it needs.

As for the cars, already the CTS looks to be a step forward from last year's very good ATS. If the next Cadillacs continue that trend, the brand might very well find itself worthy of its old tag line: The Standard of the World.

A GM global revival? Seriously?
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Read/Post Comments (17) | Recommend This Article (4)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On April 14, 2013, at 8:42 AM, donkohoty wrote:

    Quality is the name of the game.

    If GM can match Germany and Japan

    they can make it.

  • Report this Comment On April 14, 2013, at 9:24 AM, albanypark wrote:

    I guess Motley Fool can't afford copy editors. The irony of writing about an American manufacturing revival, and then writing it with typos in several places - a sign of our American decline, not revival - is lost on you.

  • Report this Comment On April 14, 2013, at 9:48 AM, SteveNovak wrote:

    GM needs to get it right on their current cars first. I bought a 2012 GMC Acadia Denali. I've been buying GM cars all of my 35 driving years. This Acadia is absolutely the worst GM car that I have purchased. Transmission problems, recall, surging engine problems, moving driver seat while driving, no performance. I will be trading it in for a new Ford as soon as I can justify the trade.

  • Report this Comment On April 14, 2013, at 9:51 AM, Stevegarry22 wrote:

    I would not buy a GM product on a bet. They are junk thanks to the lazy union labor!

  • Report this Comment On April 14, 2013, at 9:59 AM, nonratracer wrote:

    Cadillacs are and have always been boxy and ugly.

    No style at all. It may have a nice ride but that is not going to get me to buy one.

    looks of a car come first then the performance, then the comfort.

    There is no way ever that a Cadillac will ever compete with BMW or Mercedes.

    It would take a complete change in design on the look and shape of the car and that is never going to happen.

    Performance wise, they have the potential, however!

    BMW makes the HP in a straight 6 that the Cadillac uses a V8 to make and the BMW gets 30mpg on the highway and has for years. cadillac will never get that and the performance out of any V8 they have.

    Cadillac should have been killed off along with Saturn!

  • Report this Comment On April 14, 2013, at 10:15 AM, mbdriver wrote:

    Once upon a time, the Caddie was extremely comfy as a luxury car should be... also the trim met a certain standard. At some point around the 90's, GM started to lose its way in an attempt to follow the Germans with sport handling/handling/suspension and even design. Unless your an amazing copycat like Lexus, that was a very bad idea.

    Caddie needs to return to its roots: a soft supple ride, boatlike handling, oversized leather seats, good trim and classic understated american style like ralph lauren. Actually, teaming up with Polo wouldn't be a bad place to start.

    Forget everything you know about the Germans, except fuel economy. A supercharged 6 is far more fuel efficient than an 8, and if tuned properly will give a good power band.

    Seriously, don't skimp on the small trim pieces. Spend an extra $100 on better quality trim, as it really makes a difference.

    I drive a mercedes G500 so I know quality.

  • Report this Comment On April 14, 2013, at 10:45 AM, aWintersTale wrote:

    When one speaks of "competing" with Mercedes and BMW, the unconscious perception that rises into a conscious formulation and assessment must be the same as these two competitors. In other words, what do you think of when you read an article on a Caddy, or see one on the street? That which rises up, is it the same as the feelings, thoughts, and desires towards a Beemer? Should the Caddy compete in this kind of way? Or, what if the Caddy's image is boosted by workmanship, advertisement, and quality - to stand on its own - without the need to compete for the same heart and mind feelings as when viewing a Mercedes. Personally, I feel that this may be the way to attract customers. Changing the Caddy impression when viewed in the same sentence as Mercedes and BMW would be very difficult, as such impression is the result of many years of viewing history, of GM in general, and Cadillac in particular. The Cad should stand on its own. Its own quality, its own pride and confidence in it's product. That, along with well thought-out advertising, which, by the way, I am seeing a lot of these days.

  • Report this Comment On April 14, 2013, at 11:17 AM, swimclan wrote:

    The question should be more like can BMW and Mercedes compete with Audi? USA will never match the quality of the Germans

  • Report this Comment On April 14, 2013, at 12:04 PM, RoxanneMarie wrote:

    As to luxury, I prefer the Lincoln over all of them. I feel like I am sitting in butter with the great leather it has. Driving it is smooth and the car seems to last forever.

  • Report this Comment On April 14, 2013, at 12:10 PM, jstavene wrote:

    BMW, has a tradition as does Porsche,,,that the car be simple enough so that the owner could do his or her own service if they wish (they try hard) Many or most buyers probably do not, but once you have owned these you can see a form follows function.

    Mercedes,,, I have seen a similar philosophy,,,

    Last GM vehicles I and my family owned were cadillac (seville) to saturn to chevy cavalier,,, and then my siblings 2 have gmc trucks,,(I prefer ford) when I and mine have had to call it ranged from bearings to intake troubles,,and GM treated us badly ,In fact in my area (Thief River Falls MN 56701) the GM people go to the ford dealer or the dodge dealer because the GM dealer is crook who does shabby work,,, so GM seems only as good as their dealers to me,,, the cars and trucks used to be my favorite (cadillacs, used to be big motors,,,fast,,,) then for a time they became terrible I had one that had 6 accesory belts,, (they switched to a modern belt now) uhm being so late in buliding a practical solid awd,,,,and the largest were rear wheel only for us meant these were summer cars at best,,, terrible in ice and snow,, and the body fit and finish the edges often had chipping and aligator,,troubles,,(orangepeel) ,,, (I have seen BMW with orangpeel trouble now n then too) but attitude,, for me,, to spend my hard earned money and then be insulted by onstar,,,or a shabby dealer,,, and the reply I usually got at a GM dealer was "these are expensive cars,,,to drive,,to maintain" well I never got that about porsches, or BMW,,,, how odd? (I suspect the problem is engineering for cadillac it felt like the testbed for new gadgets before buick,,,I prefered buicks as they had less buggy gadgetry,,,) Engineering and atittude, in dealerships and corporate,,,GM was horrible to deal with,,, they act like you buying a car is a favor to you,,,and a hardship on them??? go testdrive a few before you buy,,you may need to build a relationship with this dealer,,,imagine calling at 2am your wife and kids on the road with this car dead,,, would the dealer care,,,help?? hmm

  • Report this Comment On April 14, 2013, at 12:11 PM, GermanAmerican wrote:

    GM can compete with Mercedes and BMW; only not in America. America's biggest export is our culture and American cars are a big part of that. Don't forget BWM and Mercedes while ultra status symbols in the US are used as Taxis and Police cars in Europe. American cars are the status symbols in Europe, Asia, and Middle East.

  • Report this Comment On April 14, 2013, at 1:27 PM, specstrum wrote:

    germanamerican didn't know that thanks for the one who called cads boxy u must think corvettes are also,bet you drive a Honda

  • Report this Comment On April 14, 2013, at 2:29 PM, wirtwizard wrote:

    I believe that headline should read "Can Mercedes and BMW really compete with CADILLAC?"

  • Report this Comment On April 14, 2013, at 4:42 PM, Autobot66 wrote:

    After spending over 30 years in the auto industry i have seen enormus changes! Having spent most of those years on the factory level repairing various vehicles over 4 decades, i know Caddy can compete with any luxury brand bar none. The last several years working at dealerships in the service department my suspicions have been verified, most foreign brands are overrated. Reliability of german brands are inexcusable, they are like a high matenience woman. Safety recalls of japanese brands are all safety related problems, not to be overlooked like a small fit or finish defect that GM has suffered from past quality issues dating back 20 or 30 years. Those problems no longer exist, huge improvements over the past 10-15 years have paid off. Problem is many consumers haven't bothered to test drive Ford or GM during this period. Their vehicles measure up in every way, except the status and price tag. American brands are now more reliable and cheaper to own and operate. I should know, i get tired of making excuses for expensive foreign vehicles that have to be serviced like a spoiled diva. It is surprising what people will tolerate just to try to impress someone. You don't always get what you pay for, i see these customers everyday and they have valid concerns with brand new vehicles. Our economy needs consumers to consider American companys as an alternative to supporting foreign companies who transfer our wealth to their economies. Whether its buying foreign oil or cars we need to strengthen our economy. How we spend our money makes a difference, especially when it keeps Americans working and paying taxes, instead of in the unemployment line!

  • Report this Comment On April 14, 2013, at 8:16 PM, nonratracer wrote:

    How do you get past Cadillacs ugliness? I see that the Scion took notes from early Caddy's as it is just a box with wheels.

    No matter how nice a car rides, you have to be first attracted to the cars appearance. .

    And to the person who tried to assume I think a corvette is boxy. The Corvette lost it's style after 1967. It hung on until 1979 until they made them really ugly.

    I wouldn't have a Honda if someone gave me one. I drive a BMW. Cadillacs are too ugly period!

  • Report this Comment On April 15, 2013, at 9:14 AM, TMFMarlowe wrote:

    @nonratracer: I used to be a dedicated BMW owner, but not anymore. Have you actually looked at the latest Cadillacs? On looks alone, I'd take an ATS (or a CTS wagon) over any current BMW aside from the 6-Series.

    To my eye, Cadillac's styling has steadily improved just as BMW's has gone from "excellent" (in the 1990s) to "bizarre" (the Bangle era) to "boring".

    The current Audis look great, and the current Mercedes look very good. But BMW? Seriously? Yawn. They're still excellent cars, but exterior styling isn't a strength.

    John Rosevear

  • Report this Comment On April 21, 2013, at 12:50 PM, Tomsriv wrote:

    Their is no question they can compete. My wife and I cross shopped the ATS with a 3 series. I really wanted to buy American, but a few things in the Caddy were not to my taste. The CUE system was to difficult to use, even after they gave me a demonstation I just wasn't interested. I work in IT helping people figure things out with their comptuers and I didn't want to take my work home with me. Give me knobs and sliders for radio and AC. Also the 2.5 4cyl engine lacked torque (same with BMW 4cyl. We ended up going with a used 3 series to get a six cylinder without paying through the nose. Next time I will cross shop again.

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