Cadillac chief: NYC move paying off
New York — A year and a half since General Motors Co.’s Cadillac packed up at the Renaissance Center for a new start in Manhattan, the brand’s leaders say they are making strides in transforming the famed marque into a dominant global luxury player.
Cadillac has a mostly new staff for its global headquarters, housed in modern offices in trendy Soho. Its new ad campaign, “Dare Greatly,” is making inroads with key younger buyers, the brand says. And it has a half dozen new vehicles, including more crossovers, on the way to improve its reach to 90 percent of the luxury market by 2021.
GM moved the Cadillac headquarters away from Detroit in September 2015, prompting politicians and local business leaders to complain directly to CEO Mary Barra. The idea, explained by Cadillac President Johan de Nysschen, was to put some distance between Cadillac and the rest of GM — and to park it in the heart of a global luxury capital.
A veteran of the Audi and Infiniti luxury brands, de Nysschen expects that re-establishing the brand as the “standard for the world” to take as long as 15 years. It has internal milestones to hit along the way, namely gains in brand image, owner satisfaction, customer loyalty and global sales.
“The plan is on track,” he said in an interview.
Some positives: Brand revenue has increased the past two years, and Cadillac’s average U.S. sales price in April was just above $55,000, about $5,000 higher than the luxury average and topping competitors such as BMW and Lexus. It earned the “Most Improved Super Loyalist” award earlier this year from IHS Markit for customers who buy three straight vehicles from the brand. Sales in ever-important China continue to rise, soaring 92.5 percent through the first four months of the year and running ahead of the sales pace in the U.S. Cadillac global sales are up 31.6 percent this year through April.
Cadillac needs to sell customers on the merits of the brand, product and dealership experience, de Nysschen said. Customers will see a new face of Cadillac in the 925 U.S. showrooms. Last month, the brand launched Project Pinnacle, a controversial plan that changes the way dealers are paid, placing dealers into five tiers and rewarding them based on dedication to the brand and customer experience. The program will make available an additional $800 million for Cadillac dealers in the U.S. over the next three years.
“It’s not there for the taking,” he said, “it’s there for the earning.”
And yet Cadillac faces challenges: Its sedan-heavy lineup in an era of booming SUV demand is weighing on U.S. sales, down 1.3 percent this year through April. Cadillac also has increasing competition from luxury brands such as Infiniti, whose U.S. sales rocketed up 26.1 percent through April, and from the Lincoln Motor Co., undergoing its own revival and seeing rising sales. And sales still fall well short of other German and Japanese brands who have the lead in luxury sales. Cadillac also does not plan to pursue growth in Europe until sometime next decade.
Michelle Krebs, executive analyst for Autotrader, said location isn’t everything for a luxury automaker and Cadillac needs more SUVs. A new XT4 small crossover is due out next year, analysts say.
“It’s about the product line and the brand strength,” Krebs wrote in an email. “Cadillac must do well in New York City and Los Angeles — the two biggest, long-established luxury markets — as well as a handful of other major cities, like Chicago and the up-and-comers of Miami, Dallas (Lexus’ headquarters) and Houston.”
De Nysschen said U.S. sales will be flat for a time until it can launch new vehicles into showrooms. The luxury brand is pumping $12 billion into eight new vehicles by the end of the decade. Cadillac says it’s focused on quality business over quantity, disciplined incentives and higher average sales prices.
“Our aim is not to park a Cadillac in every driveway, but the right driveways,” he said.
Cadillac executives say the move to New York is aiding the brand’s continued rebirth.
“It’s working very well,” said Uwe Ellinghaus, a BMW veteran and now Cadillac’s global chief marketing officer. “I can say that we were able to attract talent from the luxury automotive space as well as the luxury non-automotive space.”
Cadillac moved just 23 people from Detroit to New York, some in key leadership roles. The rest have been new hires from industries such as aviation, hospitality, banking and fashion. About 75 percent of the staff has master’s degrees or higher, and the team is young.
Now, 120 people work from the top two floors of the 330 Hudson building in Soho’s Hudson Square neighborhood. Fellow tenants include Pearson Education, TED and the Financial Times. Cadillac’s space is modern and elegant, and features artifacts from the brand’s heritage.
The semi-open office environment devotes one floor to finance, public relations, global transformation, strategy research and analytics; the other houses marketing, advertising, global alignment, sales operations, dealer relations and product planning.
And on the main floor of 330 Hudson, Cadillac last year opened Cadillac House, a 12,000-square-foot brand experience center. The space includes a public coffee shop, a retail store maintained by the Council of Fashion Designers of America and a rotating art gallery through Visionarie, an art and culture magazine. Cadillac features its new and historic vehicles in the space, which last month was used for a media event associated with the New York auto show.
The office space differs greatly from the Renaissance Center. Cadillac occupied one floor in the RenCen. Cadillac design, research and development, and engineering remain based in Warren, and GM has created a core Cadillac engineering team to focus on the luxury makes.
De Nysschen says his new team at Cadillac is making strides in achieving a new identity for the storied brand. In fact, the team came up with the idea for BOOK by Cadillac, a new $1,500-a-month luxury vehicle subscription service that provides members on-demand access to Cadillac vehicles. It’s being piloted in New York and will roll out to other areas.
The brand has had some successes in re-establishing itself, analysts say, but it has more to do.
“It ultimately comes down to the product, and we just haven’t seen enough of the new product initiative to say it has been a success or not,” Jeff Schuster, senior vice president of forecasting with LMC Automotive, said in an email. “However, Detroit is going through a major revival and has become quite hip and trendy. So what Cadillac was seeking may have been in its backyard.”