No. 915
September 20, 2017
 

About The Autoextremist

Peter M. DeLorenzo has been immersed in all things automotive since childhood. Privileged to be an up-close-and-personal witness to the glory days of the U.S. auto industry, DeLorenzo combines that historical legacy with his own 22-year career in automotive marketing and advertising to bring unmatched industry perspectives to the Internet with Autoextremist.com, which was founded on June 1, 1999. DeLorenzo is known for his incendiary commentaries and laser-accurate analysis of the automobile business, as well as racing and the business of motorsports. Author. Commentator. Influencer. The Consigliere. Minister of the High-Octane Truth. DeLorenzo is considered to be one of the most influential voices commenting on the business today.

DeLorenzo's latest book is Witch Hunt (Octane Press  witchhuntbook.com). It is available on Amazon in both hardcover and Kindle formats, as well as on iBookstore. DeLorenzo is also the author of The United States of Toyota.

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The Autoextremist - Rants


Tuesday
Sep052017

CADILLAC HAS ITS MOJO BACK? THE NUMBERS DON’T ADD UP.

By Peter M. DeLorenzo

Detroit. There seems to be a lot of smoke being generated by Cadillac of late. Part of it revolves around its burgeoning success in China, but most of it seems to be a particularly inflated – and grandiose - brand of wishful thinking, akin to an automotive Stuart Smalley routine: 

We’re good enough.

We’re smart enough.

And doggone it…

People like us!!! 

The latest reason for gloating emanating from Cadillac headquarters seems to be a recent (August 30th) piece by Mike Colias in The Wall Street Journal with the lead headline – “Cadillac, After Years of Struggle, Has Found Its Sweet Spot: China.”

In the mostly glowing piece, Cadillac comes off as the new force to be reckoned with in the Chinese luxury market. In fact, GM’s luxury division now sells more cars in China than here in the U.S., which seems to have energized Cadillac execs to no end. That’s all well and good if you squint hard enough and ignore some glaring details – as Cadillac execs and some of its bullish dealers are wont to do – but when you really look at the numbers, the reality of Cadillac’s success paints an entirely different picture. 

Think about it, when ex-Audi guru Johan de Nysschen joined General Motors (his brief post-Audi stint at Infiniti doesn’t count, amounting to a cup of coffee), he laid out a five-year plan that was not only green-lighted by Mary Barra and Dan “I Am” Ammann, it was funded with a major league commitment of $12 billion (that’s with a giant “B”). That’s serious cash-ola in this business, folks, but de Nysschen’s track record in establishing Audi as a top-tier luxury brand in the U.S. market gave him the kind of credibility that GM simply didn’t have in its ranks, so Barra & Co. went all in on The Plan for Cadillac.

And here we are three years into that plan, and what do the numbers indicate? In communicating with my friend and colleague Gary Vasilash, Editor-in-chief, Automotive Design & Production, who is an expert at scouring sales numbers and identifying trends, the numbers for Cadillac indicate that all is not well with GM’s investment. As Gary said, “According to GM, the average transaction price in August for Cadillac increased to $53,300. That’s good. And GMC hit a year-to-date ATP of $43,400. Not as good, but still solid. Yet it is interesting to note that GMC sold 47,718 vehicles in August and Cadillac 15,016.”

And let’s not forget that even though Cadillac is now selling more vehicles in China, the profit margins, due to the joint venture agreements mandated by the ruling Communist party, are significantly reduced, so execs suggesting that Cadillac has it goin’ on because of China deserve a giant asterisk attached to everything they say.

Forget about China for a moment, how is Cadillac doing in this market? The XT5 crossover and the Escalade ESV are doing quite well, but the rest of the lineup? Not so much. Part of that is due to the fact that we are living in a particular kind of SUV/Crossover Hell, where consumers have simply walked away from buying cars for the most part, but part of it is also due to the fact that Cadillac has abandoned all pretense of marketing its historical legacy to anyone in this country, in favor of mining the gold that exists in emerging – and younger – demographic groups. But more on that in a minute.

Another component of that previously mentioned GMC vs. Cadillac comparison? Don’t forget that while Cadillac has its own platforms created and embellished around the “vision” for the future of the brand, GMC massages existing – meaning it shares underpinnings with Chevrolet – GM platforms, which is about as “old school” as it gets. But in this case “old school” isn’t a negative, because it adds up to some serious dough-re-me. Think about this for a minute – not only do the numbers not add up, but also the real profitability being brought into GM’s coffers by Cadillac pales in comparison to what GMC is delivering, especially given the ball-busting investment GM laid on the table for its luxury brand.

Where is all of this going for Cadillac, you might ask? Nowhere good is the short answer.

GMC is operating as the not-so-little engine that could, marketing visually massaged (to differentiate them from the more mundane Chevrolet versions) luxury-oriented vehicles to new heights that push right up against Cadillac in the market. To its credit, GMC is not trying to pretend to be something it is not (although its advertising is still terribly lackluster), but it has found its niche in the market and within the corporation, and it’s delivering big-time profits for the denizens of the Silver Silos.

Cadillac? The turnaround of the brand was always going to take a long time; in fact I estimated three years ago that it would take the better part of a decade and a half. But three years into a five-year plan it’s not looking good. And pointing to the somewhat dubious success in China as vindication of “The Plan” isn’t cutting it. 

You can blame the insatiable consumer demand for SUVs and crossovers in this country for Cadillac treading water in this market. And you can blame the fact that Cadillac’s product cadence is woefully lacking in addressing this issue, with the first new crossover not expected until next spring and subsequent product entries lagging behind that. But the fact remains that de Nysschen’s strategy to remake Cadillac in Audi’s image has been an egregious miscalculation.

As I’ve said repeatedly in my columns over the years, in order to succeed, Cadillac must be allowed to be Cadillac. But the current Cadillac brain trust refuses to acknowledge that this is a viable path for the brand. In fact Cadillac execs go out of their way to trample on the legacy of the brand at every opportunity.

How so? Let’s review…

Hanging nonsensical Audi-esque nomenclature on its vehicles in the hopes that the average consumer will warm up to them. This just in: It’s Not. Gonna. Happen. Because no matter how you cut it, “CT6” is evocative of absolutely nothing, while a name like Eldorado conveys the kind of imagery that is unmistakably, Cadillac. Cadillac’s ridiculous naming regimen is not only absurd; it’s inauthentic to the brand to the nth degree. Why do you think that the Escalade is Cadillac’s premier statement for the brand? I’ll answer that for you: First of all, it has true, in-your-face design presence. And secondly, it has a Cadillac-worthy name.

Marketing “air” to people who aren’t listening and who don’t care. Which Cadillac managed to do in convincing fashion by advertising its new Super Cruise technology on the MTV video awards to an imaginary target audience. But then again the marketing directive from on high is to aim at people who have no interest in the brand while dismissing anyone over 50 as being irrelevant and inconsequential. This is all because of a fundamental belief by Cadillac marketers that by 2020 Millennials will be calling all the shots, and to spend one dime or aim one piece of communication on those age-inappropriate unfortunates is simply a waste of time. (That by doing this Cadillac marketers are leaving millions of dollars in profits from sales on the table doesn’t seem to matter, because it’s going to be great in the next decade, just you wait and see.) 

Add to this the fact that the Cadillac brain trust has turned its back on two of the industry’s most significant and compelling concept cars of the last decade – the Ciel and the Elmiraj – while trying to foist cramped Audi-sized cars like the ATS and CTS down consumers’ throats in the market in the hopes that they’d “get it.” This has been an abject failure and a nonstarter, which has only been magnified by the SUV/Crossover frenzy. (Yes, I know, the ATS-V and the CTS-V are magnificent machines, but they’re wasted at Cadillac. Instead, they should be part of a new Corvette division, as I’ve said for years.)

But the most depressing part in all of this is that de Nysschen & Co. are squandering the historical legacy of the brand. It’s a legacy that has survived countless product missteps, management faux pas and false starts yet still resonates with consumers like few other brands have throughout history. To this day you still hear people and companies say, “It’s the Cadillac of ____” to bestow a certain gravitas to a product, an instant, collective recognition that transcends all other adjectives.

This just in: There is no need for Cadillac to emulate Audi, not in any way, shape or form. Cadillac’s future success shouldn’t hinge on becoming a faux interpretation of a German luxury brand just to achieve relevance again. As a matter of fact, it’s an insult to what is still considered to be America’s foremost luxury brand, one that still resonates far and wide as The Standard of The World, even though other car companies exceeded its product reach long ago.

Cadillac still has all the tools to become a highly sought after and desired brand. It has the historical legacy, it has a treasure trove of evocative names – and some new ones too – and GM not only has the engineering chops, it has the design talent to craft a visual renaissance befitting of the brand's legacy.

It’s interesting, but in that aforementioned article in the WSJ, Shanghai entrepreneur Zhenyu He, sees Cadillacs as a symbol of American grandeur. “It sets me apart and represents American heritage,” said Mr. Zhenyu, 40 years old, most of whose friends drive BMWs.

I find it sad that you have to go all the way to Shanghai to find people who actually understand what Cadillac is supposed to be all about.

Three years into Cadillac’s latest reimagination it’s clear to me that a legacy is being squandered and an opportunity is being lost.

And unless and until there is a strategic shift in Cadillac management’s thinking, the brand is destined to tread water for years to come.

And that’s the High-Octane Truth for this week.