Cadillac Makes Beautiful Cars. Too Bad Americans Want SUVs.
Posted May 17, 2018 8:38 p.m. EDT
When General Motors recruited prominent auto executive Johan de Nysschen to lead Cadillac in 2014, he hoped for a cavalry of new sport utility vehicles to shore up the luxury brand’s weakest position.
As it awaited reinforcements, Cadillac soldiered on with a legion of widely praised sports sedans, the kind of beautifully engineered vehicles its German rivals would have been proud to call their own.
But now Cadillac finds itself overrun by German and Asian SUVs, and GM’s leaders have parted ways with the man once seen as the brand’s future. And America’s premier luxury car brand must reckon with an uncomfortable truth.
“Cadillac is just not selling what people want to buy today, especially in America,” said Karl Brauer, executive publisher of Kelley Blue Book.
GM had lured de Nysschen — the rare company outsider to lead a GM division — on the strength of his successful stint atop Audi of America. His first major act was to place physical and psychological distance between Cadillac and Detroit, moving Cadillac’s headquarters from Motown to Manhattan in 2015. One result was a brand showpiece — but not a sales showroom — called Cadillac House.
In New York, de Nysschen believed, Cadillac could attract top talent, take the pulse of consumer trends and woo the coastal buyers it had struggled to win over. He also outlined GM’s plans to invest $12 billion by 2020 to develop eight new Cadillac models, including the kind of crossover SUVs that had been conspicuously absent from its lineup.
“How is it possible that we have so few crossovers from this iconic American luxury brand?” de Nysschen said in an interview at the time. “The Germans have more than I can count on two hands.”
At BMW alone, that count now includes the X1, X2, X3, X4, X5 and X6, with the most expensive, the three-row X7, arriving next year. All that from a German brand that built its reputation on high-performance sport sedans and was once criticized for pandering to American tastes by building SUVs. In contrast, while GM is known for its expertise in SUVs and trucks, Cadillac has just one car-based SUV: the midsize XT5, which merely replaced the defunct SRX.
Even as rival luxury brands have minted money with downsized SUVs, Cadillac only showed its inaugural compact crossover, the 2019 XT4, at the New York International Auto Show in March. And perhaps more puzzling, Cadillac’s greatest sport utility success story, the massive Escalade, is now being upstaged by Lincoln’s red-hot Navigator, whose style and lavish interior have impressed critics and buyers.
The result is that Cadillac, a brand that had begun to transform its stodgy, retiree-only image during GM’s post-bankruptcy comeback, is struggling. Cadillac’s annual domestic sales had rebounded above 180,000 in 2013, up from about 110,000 in the recession doldrums of 2009. But sales plunged to 156,000 by 2017, even as the German brands were soaring. In the closely watched luxury race, Mercedes rode its own SUV-heavy lineup to 337,236 sales in 2017, while BMW found 305,685 buyers, nipping Lexus’ 305,132.
Now, GM’s leadership has replaced the South African-born de Nysschen with Steve Carlisle, the president of GM Canada, who joined the company 36 years ago. In a statement, Dan Ammann, GM’s president said that de Nysschen had set “a stronger foundation” for Cadillac.
“Looking forward, the world is changing rapidly, and, beginning with the launch of the new XT4, it is paramount that we capitalize immediately on the opportunities that arise from this rate of change,” Ammann said.
That 2019 XT4 finally goes on sale this fall, priced from $35,790, and it will need to elbow its way through a crowded party of compact SUVs. A three-row XT6 is also in the works, but it will not arrive before 2020, according to George Peterson, president of AutoPacific, an automotive research firm. Peterson already counts some 38 small crossovers in the marketplace, ranging from $20,000 to more than $90,000, and said that count should soon reach 45.
“Cadillac is recognizing that it’s a crossover world, but they’ve been slow to get off the dime,” Peterson said. “They’ll be launching into the teeth of a hugely competitive battleground.” Cadillac may have had a chance to move more quickly.
Following his hiring, de Nysschen tried to persuade GM’s leadership to move SUVs to the front of the development line, according to two company officials who spoke on the condition of anonymity because they were not authorized to discuss internal matters. Traditional sedans and coupes that were already in the product pipeline, including the flagship CT6, proceeded on course. Despite wildly positive reviews, they have mostly fallen flat with SUV-besotted consumers.
Another former GM executive, Robert A. Lutz, can empathize with the predicament de Nysschen faced. Lutz, a former Chrysler and BMW executive, was also a high-wattage outsider facing huge expectations when GM lured him out of retirement in 2001, naming him vice chairman and giving him far-reaching control over GM’s designs and product lineups. In contrast, Lutz said, de Nysschen lacked veto power and had to answer to several higher-ranking executives.
“Johan was a very able executive, certainly able to run a premium brand,” Lutz said. “But he was never fully in charge.” That’s not to say de Nysschen did not have successes.
Lutz said de Nysschen had done critical dirty work by breaking Cadillac’s habit of dumping production into rental fleets to plump sales numbers, a practice that marred the brand’s image, retail prices and resale values. By April, according to R.L. Polk data, retail buyers paid an average of nearly $54,000 for their Cadillacs, second only to Mercedes among luxury brands.
De Nysschen also helped expand Cadillac’s international reach: Even as its American sales fell 8 percent last year, Cadillac’s 175,000 sales in booming China brought its global total above 356,000, approaching 1978’s historical high for the 115-year-old brand. And Cadillac’s semiautonomous Super Cruise technology — which allows full hands-free driving on most major highways — is being hailed by some critics as superior to Tesla’s vaunted Autopilot, particularly for its emphasis on safe operation.
But de Nysschen also frustrated Cadillac dealers with Project Pinnacle, his carrot-and-stick plan that offered tiered incentives to dealers who invested in showroom upgrades and Lexus-style customer service — and steered others toward $180,000 franchise buyouts.
Lutz suspected that de Nysschen’s physical separation from Detroit made it harder to win allies and arguments alike. He recalled poring over clay models of car designs during his GM tenure, and being able to march into a finance executive’s office if he had removed $200 worth of chrome that Lutz viewed as critical.
“I’d say, ‘Where did the chrome go?” Lutz said. “You stare him in the eye, argue with him and get it fixed. Even in this day of electronic connectedness, distance matters.”
Brauer, the Kelley Blue Book publisher, panned Cadillac’s move to New York as window-dressing. It might have made sense, he said, if the brand had set up design studios or engineering in New York, but those linchpins of auto creativity remained in Detroit. The change of address seemed a dubious sequel, Brauer said. Between his time at Audi and Cadillac, de Nysschen led Infiniti, where he convinced its parent, Nissan, to move its luxury headquarters from Japan to Hong Kong.
Some observers fault de Nysschen for spending too much effort chasing the Germans, including by challenging them on their home turf: the famed Nürburgring circuit. Cadillac’s 640-horsepower, nearly 200-mph CTS-V became the world’s first production sedan to circle the 12.9-mile track in less than 8 minutes.
But Lutz, who forged his own industry reputation as an ultimate “car guy” by birthing performance legends like the Dodge Viper and the CTS-V, said that most of today’s luxury buyers were oblivious to the nuances of speed or handling.
“Not one in 1,000 Americans even knows where the Nürburgring is,” he said.
When he was hired, de Nysschen said that Cadillac would be a distinctly American alternative, on par with any rival in design, quality and performance. But, reached via email, de Nysschen rejected the idea that Cadillac “has been trying to ‘chase the Germans.'”
“The team absolutely wants to leverage the unique American heritage,” he wrote, while rebuilding Cadillac’s reputation for excellence in such areas as craftsmanship and fit-and-finish.
“I believe that is a noble pursuit, worthy of an iconic brand such as Cadillac.”