Escalade

The Cadillac Escalade has shown the largest year-over-year sales gains in 2014 for the automaker. Source: General Motors.

Despite having a slew of recall issues in 2014, General Motors (NYSE:GM) has seen its sales hold relatively steady. And while overall sales may be doing OK for the automaker, there's one brand in particular that isn't: Cadillac. 

Sales for Cadillac have declined 4.7% in 2014, after falling 17.8% in the month of August. This pales in comparison to how well other luxury automakers are doing, in particular, Ford's Lincoln, which has seen sales jump 13.4% this year. 

An ugly year for Cadillac
Cadillac came flying high into 2014, practically outpacing all other luxury automakers from the year prior after posting a 22% sales gain in 2013. 

Two of Cadillac's three top-selling models last year, the ATS and XTS, have seen sales plummet, down 20.3% and 22.5% this year, respectively. 

The CTS -- which won Motor Trend's Car of the Year award for 2014 -- has seen sales fall 6.2% on the year. Escalade sales are now the only bright spot, up 21% so far. On the flip side, though, the model represents the lowest amount of units sold this year for Cadillac. 

The SRX was Cadillac's only bright spot. Through June, sales were up 20.3%. Sales disappointed in July, but plunged 37% in August and brought the year-to-date sales gain down to just 5.2%. 

What's happening, and how can it be fixed?
Perhaps the most startling part of this situation is that the sales decline doesn't have a singular explanation. After all, luxury auto sales are doing well, overall auto sales are doing well, and the labor market is the strongest it's been in years. 

General Motors has been somewhat quiet in this regard. My thesis includes a number of different reasons for the decline:

  • Intense competition in the entry-level luxury segment (hurting the ATS)
  • Emerging pressure in the SUV/crossover segment from BMW and especially Lincoln (hurting the SRX)
  • Too-high pricing for what consumers feel is fair (hurting the CTS and XTS)

Add in the fact that General Motors doesn't exactly have the greatest reputation at the moment due to the recalls, and it's not entirely surprising that its luxury lineup is taking a hit. But that doesn't meant it can't be fixed. 

Johan de Nysschen, who formally ran Nissan's Infiniti brand, is now at the helm of Cadillac after being hired last month.

Cadillac Srx

The Cadillac SRX has seen its sales drop significantly over the past two months. Source: General Motors.

According to The Wall Street Journal, de Nysschen is cutting inventories, lowering the number of dealerships, and adding more vehicles to the lineup. 

In order to lower inventories -- which currently stand at "well over 100 days," as opposed to de Nysschen's more preferred "about 30 days' supply" -- he is suspending production. The company halted production in its Lansing, Michigan, plant, which mainly produces ATS and CTS sedans, for three weeks. 

Lower production will ease the glut of supply and make inventories smaller. This will help the company to better meet the current demand from consumers. 

Back in March, I questioned whether Cadillac would be able to get away with some of its price hikes, mainly for its CTS and Escalade models; de Nysschen doesn't seem to think so regarding the ATS and CTS, telling the Journal that pricing for both cars is problematic.  

But instead of lowering prices, the automaker prefers to make features and add-ons for the vehicle less expensive for consumers, so as not to damage resale values.

In terms of expanding the portfolio, de Nysschen tells the Journal he wants to see a more compact crossover vehicle -- probably along similar lines as Lincoln's newly introduced MKC. GM is also reportedly revamping the SRX. If GM completes both of these tasks, and the SUV/crossover segment remains hot, then this could help lead to a resurgent Cadillac brand in the future.

But that's not all. Cadillac plans to introduce an upper-end sedan: the CT6. According to the Associated Press, de Nysschen says, "the objective for this upcoming model is to lift the Cadillac range by entering the elite class of top-level luxury cars." The model is expected to price above its current sedans and launch sometime in late 2015.

Cutting production and lowering the dealership count are short- and intermediate-term fixes for the company. Long-term prosperity will come from Cadillac's ability to win over customers with both new and old models. De Nysschen seems to be pulling all the right levers for that to happen, but only time will tell if his plan will succeed.

Bret Kenwell owns shares of Ford. The Motley Fool recommends BMW, Ford, General Motors, and Tesla Motors. The Motley Fool owns shares of Ford and Tesla Motors. Try any of our Foolish newsletter services free for 30 days. We Fools may not 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.