Earlier this month, General Motors' (NYSE:GM) Cadillac luxury brand surprised industry observers by announcing that it would cut the prices on its acclaimed (but slow-selling) CTS sedan.
Cadillac reduced the sticker price of the CTS from $1,000 to $3,000, depending on model. The company also said it would include more standard equipment in some trim levels.
Why was this a surprise? Companies regularly adjust pricing on slow-selling models. But Cadillac managers had been adamant: We're building cars that are as good as the German luxury brands', they said, so they'll be priced accordingly. After all, they cost just as much to build.
That position turned out to be a little optimistic: While average transaction prices for the CTS did rise, U.S. sales fell almost 4% last year despite a strong market. The reality is that while Cadillac's latest products, including the CTS sedan. are up to the standard set by brands such as BMW (NASDAQOTH:BAMXF) and Mercedes-Benz -- maybe even a bit better in some ways -- the Cadillac brand still needs a lot of work. Buyers aren't (yet) willing to pay BMW prices for Cadillacs -- at least, not enough to keep GM executives happy.
That's the simple version, at least. We were hoping for more insight, so we asked Cadillac President Johan de Nysschen to give us the full scoop on the brand's turnabout on pricing. He graciously agreed to do so -- and you can see what he told us in this video, shot on the Cadillac stand at the North American International Auto Show in Detroit. Check it out, and then scroll down to leave a comment with your thoughts. Is this the right move for Cadillac, or should it have held its ground?
John Rosevear owns shares of General Motors. Rex Moore has no position in any stocks mentioned. The Motley Fool recommends General 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.