Ford (NYSE:F) has created one of the most impressive turnarounds in business history and leads General Motors (NYSE:GM) in many ways. However, Ford trails its rival in one key area for future growth -- having a successful luxury line. Lincoln has been forgotten in Ford's turnaround story, while Cadillac is on fire right now, much to the delight of GM's management. Let's look at how the ATS is helping driving success at Cadillac and how it changed the game for consumers and investors.
Welcome back, Cadillac
"Cadillac is back," said Bob Ferguson, vice president, Global Cadillac. "Our growth is product-driven," with "new luxury vehicles with dramatic design and performance drawing new customers to showrooms."
So far this year, Cadillac has seen its largest sales increase since 1976.
"Think about that," Kurt McNeil, GM's vice president of sales operations, said in a conference call earlier this month. "We're talking about the days of disco, when Cadillac was strictly a U.S. brand back then, not one that's directly challenging the German luxury brands and gearing up to triple its sales in China over the next couple of years."
In addition to the surge in sales, roughly 70% of Cadillac ATS buyers are purchasing their very first Cadillac. That's a huge percentage and represents incremental sales and market share stolen from competitors -- a huge win for Cadillac and no small reason for this year's Cadillac surge.
The 2013 Cadillac ATS offers a unique choice among most luxury cars: a 2.0L turbocharged engine with a manual transmission. For those looking for a sporty and luxurious ride, the ATS can be equipped to meet that expectation. Its engine lineup has a 2.5L four-cylinder option as well as a 2.0L turbocharged four-cylinder one, while still offering a 3.6L V-6. The 2.5L engine puts out about 202 HP, while the 2.0L turbo generates an impressive 272 HP. As impressive as the 2.0L engine is, being one of the most power-dense engines in the industry, the award-winning 3.6L V-6 tops it with 321 HP -- nearly as much HP as my 2010 Mustang GT.
Once consumers take the flashy ride for a spin, it's evident the luxury sport sedan is as nimble and exhilarating as Cadillac claims. It's assumed that this ride would be luxurious, but in addition to the horsepower, the interior technology gives consumers a superior feel. That's backed up by Edmunds.com, which notes that the ATS finally gives the U.S. a medal-worthy vehicle in the segment, and consumers reviewing the ATS give it an average of 4.5 out of five stars.
What's more, the ATS took home the 2013 Detroit Auto Show's "North American Car of the Year" award. That was no small feat, either, as it was the first Cadillac to win in the 20 years the award has been presented. Moreover, J.D. Power & Associates named Cadillac second for customer satisfaction, trailing only Lexus in the luxury division. Check out just a handful of its interior tech features, according to GM's press release:
- Bluetooth phone connectivity with voice recognition.
- USB, auxiliary, and SD memory card ports.
- Sirius XM satellite radio with a three-month trial subscription.
- Keyless access and keyless push-button start.
- Reconfigurable 5.7-inch instrument panel cluster display.
- Full-color reconfigurable head-up display.
- Leatherette or leather seating surfaces.
- Seven-speaker Bose sound system (standard model).
Luxury brands are important to the elite global automakers for a couple of reasons. First, they bring in higher transaction prices and better margins per vehicle. This is especially true as more technology and premium options are available. For example the Cadillac ATS starts at about $33,000 but can quickly surpass $50,000 with options, and that brings in a nice bottom line figure for GM.
Second, the automotive industry is extremely loyal between brands and models. You're either a Ford truck guy or a Chevy guy -- there's no gray area. Naturally, as consumers grow older and increase their purchasing power, the next step up from a basic Chevrolet, Buick, Ford would be to the luxury level of that same automaker. This is where Cadillac is reaping the rewards, while Ford loyalists are leaving for competitor lots because the Lincoln luxury line isn't up to par, yet.
By the end of the decade, GM expects global luxury volume to increase by nearly 3 million vehicles, while the luxury share of the overall market continues to surge. Thanks to game-changing vehicles such as the Cadillac ATS, CTS, and XTS, GM is well positioned to drive in higher profits on its vehicles. It's also positioned well for success in the world's largest and fastest-growing auto market -- China.
One thing is for sure: Cadillac is back.
Fool contributor Daniel Miller owns shares of Ford and General Motors. You can follow Daniel on Twitter. The Motley Fool recommends Ford and General Motors and owns shares of Ford. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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