Howes: Cadillac swap reveals American luxury conundrum
More than 20 years ago, General Motors Co.’s Cadillac traveled to the ’97 Frankfurt International Motor Show to make a point, right in the backyard of Germany’s Big Three luxury brands.
Its all-new STS sedan would challenge Audi, BMW and Mercedes-Benz in their own game and on their own turf. Nevermind that GM’s own leaders, at least one who lived and worked over there, quietly quipped to me that no self-respecting German businessman would ever be caught dead driving an American car.
That ranking executive of GM’s longtime ward, Adam Opel AG, retired long ago. And, after 90 years of mucking about in Europe (the last 20 of it spent doing little else but losing billions of shareholder dollars), GM’s out of Europe, too. But its luxury conundrum remains.
Just ask Johan de Nysschen, the Cadillac president summarily deposed this week despite a luxury car pedigree burnished by his stints running Volkswagen AG’s Audi and Nissan Motor Co.’s Infiniti. He wasn’t moving quickly enough, chiefly in the United States, to satisfy the chip-on-the-shoulder crowd running GM today, especially President Dan Ammann.
They think they have something to prove, and they’re right. With a buoyant economy, a growing product line (albeit one still too heavily weighted to cars in an SUV-crazy market), and a cool coastal sensibility refined in SoHo, they want more — and they want it now.
Here’s the thing: billions invested in the top-to-bottom reinvention of Cadillac, in its headquarters move to a trendy Manhattan neighborhood, in the road testing on the Nordschleife of Germany’s famed Nürburgring racetrack have failed to break the foreign hegemony of the American luxury market.
Cadillac closed last year with just under 1 percent of the rich U.S. market, even as Audi, BMW and Mercedes claim more than 2 percent — each. Cadillac sold 156,440 cars and SUVs here last year, lagging almost two-to-one the results of Toyota Motor Corp.’s Lexus brand. It sold 305,132 vehicles, according to Autodata Corp.
The Germans anticipated America’s luxury SUV fever long before the hometown players, now straining to expand their SUV and crossover lineup to match the full complements from Germany’s Big Three and Porsche. One consequence is the market share disparity: he who sells a larger percentage of SUVs leads.
Across town, rival Lincoln Motor Co. finally is acknowledging a reality Cadillac so far is resisting. Beating the Germans at their own game is too costly, too fraught and too uncertain to deliver the kind of returns investors should reasonably expect from luxury-vehicle margins.
Unless you have tens of billions and a generation to burn. Most global automakers intent on building a business to compete with their industry leaders decidedly do not — as the Japanese have learned with America’s full-size pickup segment and Detroit is learning with global luxury.
The result: decidedly mixed records. GM managed Sweden’s Saab into extinction. Ford Motor Co. bought Jaguar and Volvo, failing to bring both to the standards (and profitability) they’ve since reached under new foreign owners.
Ford’s luxury brand, Lincoln, is doubling-down on its own interpretation of American luxury and placing bets in two places: the United States and China. It may be less ambitious than the Premier Automotive Group of a generation ago, but it’s more likely to earn the additional cost of capital and deliver some earnings to boot.
That’d be necessary for Cadillac, but it wouldn’t be sufficient. Cashiering Cadillac’s president amid a buoyant market and record-setting sales in China simply would not have happened in pre-bankruptcy GM. That leadership ethos of benign tolerance doesn’t exist in the upper reaches of its Renaissance Center headquarters anymore.
OK. Then what? Detroit’s two largest automakers have spent a generation trying to crack the luxury code written by the Germans, policed by the Germans and influenced by the Germans. Success has been fleeting, save segment busters like the Cadillac Escalade or Lincoln Navigator.
They need more, or history will repeat itself yet again. Getting there will take more than changing the boss — that was the easy part.
Daniel Howes’ column runs Tuesdays, Thursdays and Fridays. Follow him on Twitter @DanielHowes_TDN, listen to his Saturday podcasts, or catch him at 3 and 10 p.m. Thursdays on Michigan Radio’s “Stateside,” 91.7 FM.