For years, GM kept costs down by skimping on interiors, even in Cadillacs. No more: Plush interiors like the one on this Cadillac CTS are now a requirement in its luxury cars. Source: General Motors Company.

For many years, General Motors (GM 1.13%) struggled against two factors: high costs and an iffy reputation for quality. GM's products -- including its Cadillac luxury cars -- had to be built at lower cost than its rivals' so that GM could offer the discounts necessary to keep them selling.

That led to a downward spiral: Cheaper-feeling products needed bigger and bigger discounts to sell, and eventually, GM went broke and landed in bankruptcy court.

Nowadays, they do it very differently. GM is no longer afraid to spend what it takes to build a better product and ask a fair price for it. Nowhere is that more evident than at Cadillac, where a big-budget effort to beat the German luxury brands at their own game is under way. Today's Cadillacs have to have no-excuses interiors, handling, ride, and features.

But like any other consumer product, they still have to be built for a price. After all, they have to compete with some very good rivals. How does GM manage that?

We caught up with Cadillac's executive chief engineer, Dave Leone, at the North American International Auto Show in Detroit. We asked him what's different about engineering luxury cars versus GM's mainstream models, and his answer was very interesting -- the key difference is how he takes cost into account. Check it out in this short video.