“LOOK AT THAT CADILLAC!”: GM TRIES A GEOGRAPHICAL CURE AT CADDY

9/24/14

General Motors announced yesterday that Cadillac will move its headquarters to New York, part of a larger move to establish Caddy as a separate business unit.   Part of the rationale for abandoning the city whose founder gave Cadillac its name is, as new Caddy boss Johan de Nysschen, put it

“There is no city in the world where the inhabitants are more immersed in a premium lifestyle than New York.”

Mr. de Nysschen thus outlines about as good a reason as any not to live in New York, but I digress.

Will this move to New York work?  Caddy has to do something.  Year to date through the end of August, its sales were down 5% in a strong car market.   Making the story even worse, Caddy’s SUVs, the SRX and especially the behemoth Escalade, are selling quite well.  Sales of Cadillac cars, however, were down 15% as of 8/31/14.  Dealer lots are teeming with CTSs and ATSs that simply won’t sell.

So is moving to New York going to change Caddy’s fortunes?   Employing a little uncommon common sense, one suspects not.  But the move to the Big Apple is at least consonant with Caddy’s pricing strategy; i.e., Caddy vehicles definitely are listed at New York prices.  Therein, one suspects, lies the problem; Cadillacs are simply too expensive.  

The ATS starts in the low $30s, which yours truly thinks is a lot of money but apparently no one else does.  But try finding an ATS at that price point; walk around a dealer lot and you will notice that most of the stickers on this cramped car sport a $40 handle, and many are priced in the high $40s.  The CTS starts in the mid $40s, which gives yours truly apoplexy, and can easily reach the high $50s and low $60s.

C’mon!   These aren’t Mercedes or BMWs; they are Cadillacs, for Pete’s sake.  Yes, the current Caddy products are, in many aspects, as good as the European fare to which they aspire.  The handling of the ATS, which is at least as good, in many knowledgeable people’s opinions, as that of the BMW 3 Series comes immediately to mind.  And it is possible to argue with a straight face that the Cadillac cars are as good as or better in totality than their German competitors.  But that misses the point.

People who spend these brobdingnagian amounts on cars are buying, as much as they will never admit it, an image, not a car.  And while Caddy may be as good as BMW, Mercedes, Audi, Lexus, Infiniti, or what have you, it doesn’t have the image of those “luxury”(whatever that means) marques.  And therefore Caddy can’t charge BMW, Mercedes, Audi, Lexus, and Infiniti prices; those who buy such cars will not stand for it.   And old time Cadillac buyers are not used to paying such prices.  But Caddy doesn’t seem to care much for the traditional Cadillac buyer; in fact, Caddy seems to treat its traditional buyers like something it would like to scrape off the bottom of its shoe.  That also is a big part of the problem.  Older, largely self-made, people have money and are willing to spend it on expensive products that deliver value.  Caddy used to know that, but now seems to be tossing such customers over the side while fixating on capturing the attention of the insecure types who fancy themselves the nouveau riche and seek to prove it, perhaps to themselves, by the accumulation of showy and glittery yet ultimately useless gimcracks and trinkets.

So Caddy can tell its hometown to screw itself.  But as long as it charges prices commensurate with those that prevail in its new HQ town, and tells its traditional buyer base to also do the aforementioned anatomically impossible, it will have problems that far transcend geography.