Can Cadillac Come Back?

Cadillac hasn't competed in the grueling 24-hour LeMans race since 1950, but come next June 12 it'll go head-to-head in the French classic with 47 world-class cars seeking one of racing's most prized trophies.The specially built car will be powered by a twin-turbocharged version of Cadillac's Northstar V-8. Whether it wins, places or even finishes really doesn't matter too much: Simply showing up

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Cadillac hasn't competed in the grueling 24-hour LeMans race since 1950, but come next June 12 it'll go head-to-head in the French classic with 47 world-class cars seeking one of racing's most prized trophies.

The specially built car will be powered by a twin-turbocharged version of Cadillac's Northstar V-8. Whether it wins, places or even finishes really doesn't matter too much: Simply showing up signals that Cadillac is finally getting serious about shaking its lethargy, staging an all-out drive to rekindle the fire of its glory days.

GM's premier division faces an even bigger race than LeMans, however: It's against time.

Can Cadillac, after blundering through much of the '80s and '90s while its competitors dined voraciously on its carcass, finally pull off a comeback - before things get worse?

As recently as 1984 Cadillac was selling 320,000 cars annually (the record is 347,000 set in 1978). That sank to 182,570 in 1998 and has cost GM billions in lost revenues and profits.

Cadillac's attempt to inject new luster in what has become a fading brand already is well under way. It includes at least three all-new vehicles and a half-dozen upgrades between now and 2006, new powerplants and a new look in everything from its advertising, logo, distribution and dealerships, right down to business cards and stationery.

The new logo, minus the ducks that spawned a widely ridiculed ad campaign for Catera ("The Caddy that Zigs"), appears this month and will adorn all models by late next year. It's cleaner, more streamlined and carries less ornamentation. Like numerous other renditions during Cadillac's 97-year history, it's strictly a design having no heraldic significance, myth to the contrary.

What you won't see: The "Cadillac" script on the exterior of some models. Even though Cadillac maintains that "It's still a proud name," the script already has been removed from Seville and DeVille.

To focus its brand message more closely, Cadillac by year's end will reduce its advertising agencies from five to one: D'arcy Masius Benton & Bowles, its longtime partner based in Bloomfield Hills, MI.

All of this suggests Cadillac has at least a chance at regaining lost momentum.

Still, doubters abound. Susan G. Jacobs of Jacobs & Associates based in Rutherford, NJ, tracks the U.S. luxury car market. She thinks Cadillac may have to settle for a niche-player's role, predicting that the perennial luxury car leader will sink to fifth place this year - and stay there.

"The main problem is Cadillac's expectation that they'll be able to remain in the No.1 position," says Ms. Jacobs, "and I think this is unrealistic. BMW has never been No.1 (except in some small import markets), and they are the most respected luxury marque out there."

By shooting too high, she explains, Cadillac tarnishes its image, and boosts its costs, by resorting to costly incentives to clear out inventories. That hurts resale values as well. "Cadillac has been the worst at muddling through transforming itself," she declares.

It's probably entirely appropriate that the man who's leading Cadillac's quest is a 48-year-old native of Missouri, the "Show Me State." John F. Smith - known as "Cadillac Jack" inside GM to distinguish him from same-named Chairman John F. (Jack) Smith Jr. - now must show folks that Cadillac can live up to its longtime boast as "The Standard of the World."

"We're the tip of GM's corporate spear, and we are going to build on Cadillac's traditional strengths," vows Mr. Smith, who took over as GM vice president and Cadillac general manager in February 1997.

These, he maintains, include "standout styling, leading technology and unmatched customer service."

Don't look for Cadillac's famed fins of the '50s and '60s to grow anew, though.

"We're going to emphasize the flair and expression of Cadillac designs, but without going retro," Mr. Smith says. "What made us appealing in the '50s (and '60s) was the confidence we conveyed, an emotional distinctiveness. Everybody wanted a '60 Cadillac convertible (Cadillac has no ragtop today). We're going to return Cadillac to its roots while recognizing America's global credibility in science and technology."

That, he adds, will take into consideration "changing values" such as quality, the environment and safety.

Despite its drop from big dog to underdog in recent years, Cadillac has done some things right. In 1990 it won the prestigious Malcolm Baldridge quality award, and tied for first with Volvo and Jaguar in the most recent J.D. Power & Associates owner satisfaction survey.

It's no surprise that Cadillac has been studying comebacks by others. Mr. Smith, for example, visited Harley-Davidson, the legendary motorcycle manufacturer, in Milwaukee his first year on the job.

Like Chrysler Corp. in the late '70s and early '80s, it took a brush with death and a federal government bailout to save Harley. Both went on to make spectacular turn-arounds.

"Harley used the '60s to go back to," says Mr. Smith. "I think the '50s are better for us. That's the kind of spirit we want to restore. But I don't think a car in the world could pass a 'fin' test today."

Mr. Smith acknowledges that he has seen "missteps" at Cadillac during his 30-year GM career. "We realized we missed an opportunity in the sport/utility (SUV) segment, and switching people back later is more expensive."

But he defends against critics who roundly pan the Escalade SUV and its timing.

Escalade arrived late in 1998, fully a year after Lincoln's Navigator and several years behind other competitors. Moreover, it's little more than a thinly disguised clone of GMC's Yukon Denali.

Late or not, Mr. Smith says GM will make big profits on the current Escalade, even though it will have a short life span: It will be replaced next year by a new version.

It's helping in other ways, he maintains. For one thing, "People who are buying Escalades are 10 years younger (around 54-55) than our average buyer, and 40% are women. They also have more income - about $160,000" compared with $120,000 for DeVille buyers.

A key element in Cadillac's unfolding strategy is achieving visual design continuity from one Caddy model to the next. Thus look for the Cadillac shield-shaped, egg crate grille and vertically oriented taillamps to be dominant themes.

Based on the pummeling it has taken in recent years, and with no letup from fierce competition, Mr. Smith's job won't be easy. And there's also credibility involved: Cadillac repeatedly has tried to defend its territory with little success, mostly because its offerings missed the mark. Think Cimarron, Allante and the current Catera.

Or consider powerplant fiascos during the '80s such as dismally performing diesels and a V-8 that ran on 4,6 or 8 cylinders - when it ran. Both were aimed at boosting Cadillac's fuel economy following oil scares in 1973 and 1979. Both were flops. It also didn't help when Cadillac abandoned the large rear-wheel-drive market in 1996, discontinuing the Fleetwood, long a mainstay of the limo and funeral coach market.

Think back, as well, to 1984 when Cadillac's individual identity became blurred as it gave up engineering, design and manufacturing control when it was folded into the Buick-Oldsmobile Cadillac Group (BOC) as part of a massive GM restructuring aimed at cutting costs.

The group was disbanded by the late '80s, but by then Cadillac was already slipping - this at a time when the likes of Mercedes, BMW and Nissan's Infiniti and Toyota's brand-new Lexus divisions were snapping up younger buyers with appealing new models.

GM returned Cadillac to semi-autonomous operation for a few years, but in 1992 it once again was brought back into the overall corporate structure. Since then it has become primarily a brand-marketing outfit, with Cadillac brand managers interfacing with corporate vehicle line executives to conceive, engineer and market new vehicles.

These organizational upheavals must share the blame for much of Cadillac's woes, stealing from its focus. Cadillac, for example, all but missed the boomer luxury-car boom, clinging stubbornly to its loyal, but aging, owner body.

Seville and Catera arguably have closed the age gap, but neither has set any sales fires. In fact, Cadillac has been forced to resort to fire sales to move Cateras.

Indecision over marketing an SUV also cost Cadillac heavily as the market shifted to light trucks, and SUVs became hot tickets.

For a company traditionally guided by financial men, the result has been disastrous. Cadillac in its heyday clearly was GM's most profitable marque. Yet no one apparently had the vision to protect the franchise.

For decades the undisputed U.S. luxury-marque champion, Cadillac dropped behind Lincoln in 1998, mainly because it had nothing to compete with the high-flying Navigator, introduced in 1997. Even so, Caddy remained the passenger-car champ for the 14th straight year.

Now armed with Escalade, Cadillac ran ahead of Lincoln during the first seven months this year by a few thousand units. But that was of little solace.

Lexus led the luxury group, with Mercedes a close second, both benefiting from substantial SUV sales. Cadillac dropped to third and Lincoln to fourth. Lump BMW-owned Rover SUV sales with BMW's car sales and it actually becomes the luxury segment leader, pushing Cadillac to 4th place.

Mr. Smith argues that Cadillac has been negatively impacted by its decision to drop money-losing two-year leases, moving to three-year contracts.

Under the old scheme it would have taken in 80,000 cars from two-year leases this year, making way for potential renewals. Only half that number will come back because of the switch to 3-year leases, he emphasizes. Some 55% of all Cadillacs are leased.

Then there's the suddenly resurgent Lincoln to consider. Cadillac won't have a direct competitor to Lincoln's all-new midsize 2000 LS until an all-new Catera arrives two years from now, and it'll be another year before it gets the redesigned Escalade to compete more evenly with Navigator and other luxury SUVs.

Meanwhile, Cadillac faces the daunting challenge of stanching erosion coming from all sides, including reinvigorated Volvo and Jaguar, now part of Ford Motor Co.'s "premier" group, a resurgent Audi under Volkswagen AG, and a batch of other nameplates seeking a piece of the high-profit luxury pie.

Mr. Smith presents a strong argument that Cadillac is getting it together in time to compete for what he foresees as a growing global luxury vehicle market.

"By 2007 the luxury market is headed toward 4.6 million units," he says, about 1.7 million above the current annual rate. "Premium compact" models like the Catera will be the hottest tickets, especially in Europe, he predicts.

A trained engineer with a Harvard MBA, Mr. Smith joined what was then the GM Assembly Division in his hometown of Kansas City in 1968. He earned an engineering degree from the GM Institute five years later. However, most of his career has been in finance and planning posts, including several high-level jobs at BOC and GM-Europe. He's the only division general manager who retains a vice presidency.

A year after he arrived at Cadillac, Mr. Smith met in February 1998 with GM's top brass to shape a new future-product strategy. The twin themes of "art and science" subsequently emerged. He believes he now has the technology side covered. To demonstrate its case, Cadillac's 2000 DeVille features myriad technical innovations, including the first industry application of night vision, an option expected to cost $1,000 to $1,500.

His next big hurdle is convincing buyers that Cadillac stands for something other than just an old man's car with a rich heritage. Borrowing a page from the auto industry's well-worn playbook, Cadillac created the Evoq show car that debuted last January at the North American Inter-national Auto Show in Detroit. Its mission: to provide a halo effect on its other models.

The 2000 DeVille was developed before this strategy began to play out, so the first true test will come in 2002 when Cadillac is expected to celebrate its centennial by launching the all-new Catera, perhaps with a new name as well, off GM's new Sigma rear-drive platform, engineered and built in North America and available in some markets with a diesel V-6 and manual gearbox.

The current model, which has received a ho-hum reaction since its 1996 introduction, is built at Adam Opel AG in Germany. As a stopgap, Cadillac freshened Catera's styling for 2000.

Determined not to make yet another mistake, the first design of the 2002 Catera was scrapped. "We knew it wasn't right." says Mr. Smith. "Wayne (Vice President-Design Wayne Cherry) re-did it, and when he showed it to us, everyone applauded."

Seville, the closest Cadillac now comes to competing against overseas nameplates, is expected to jettison front-drive as well and move to the Sigma platform in 2004.

The Evoq? Cadillac officials won't even say it's been approved for production, but it's expected to debut in 2002.

After its inauspicious start, Escalade joins GM's other full-size SUVs (Chevrolet Tahoe and GMC Yukon) in a total re-do for model year 2001, giving Cadillac a chance to set it further apart from its siblings. Another upgrade is expected in 2005.

A still-unnamed "family activity vehicle," also on the Sigma platform, with the Lexus RX300 as its benchmark, is expected to arrive around 2003.

The 2000 DeVille gets a makeover around 2005, presumably to bring it closer to the new look Cadillac is trying to convey. Plans for the current, aging Eldorado coupe remain vague, although it will share updates while it remains in production. Eldorado is the last of a trio of GM upscale coupes that came out in 1987 to remain in production.

Winning over and keeping younger buyers is Cadillac's most pressing challenge. He's biased, but Michael J. Devereux, 34, DeVille Brand Team assistant brand manger-product, says younger folks just may be enticed by the 2000 DeVille DTS performance sedan.

He says, "I think it's the kind of car I could pull up to a friend's house and he'd say he'd like to buy one. That doesn't happen today. It (the '99 version) is not pitched to younger people like me. There's been a disconnect because of the styling." David Andrea, 38, chief economist and automotive analyst for CMS Worldwide in Northville, MI, is turned off by Escalade, saying it flies in the face of re-establishing Cadillac as a premium brand.

He says, "It doesn't move the brand back to its heritage - or ahead. It doesn't match the Lexus LX470 or Navigator, so why didn't they wait and establish a new marque that Lincoln and Lexus would benchmark?"

As a relative youngster who comes from "a Ford family," Mr. Andrea observes that "The real question for me is, can Cadillac transcend generational lines? Will the things that drew people in the '50s work in the year 2000?

"Back then they had exclusivity, prestige, luxury and also technology. You see Audi and Jaguar coming back, which proves if you have the right products, dealers and marketing theme you can do it. Can Cadillac do it? Yes, if they execute well."

David E. Cole, a longtime GM watcher and son of the late Edward N. Cole, GM president in the 1970s, says Cadillac can come back if it doesn't stray from its vision.

Mr. Cole traces the division's downward spiral to the early '80s when experts forecast that fuel would reach $3 a gallon. By resorting to Cimarron, a gussied up Chevy Cavalier, and the ill-fated diesel and 4-6-8 engine, "things got out of sequence," says Mr. Cole, managing director of the University of Michigan's Office for the Study of Automotive Transportation (OSAT).

"Instead of Cadillac leading, it lowered its customer base, and it's easy to go down, but not up," he says.

The Evoq has a shot at turning that around, he suggests. "That's where it should be: Lead with a theme and drop that theme down. They know that now, but they didn't know it in the early '80s. GM was trying desperately to be first in fuel economy."

Besides Cimarron, that thinking produced fleets of other GM lookalikes, and Cadillac was not spared, says Mr. Cole. In a nutshell, "GM got finessed," he says.

In contrast, luxury brands such as Mercedes and BMW started at the high side and used success there to spin off smaller, less pricey cars. But they had a distinct advantage, he says: Just one brand to carry the flag.

"Cadillac's problem is that it has too many brothers and sisters. If Cadillac did that, it would rob from Buick and Olds," he says.

Cadillac also was hampered in the early '90s by GM's cash shortage, Mr. Cole observes. "They didn't have the capital to put on a full-court press. The financial cuffs didn't come off until 1995-'96."

Looking ahead, he concludes that the next five years will determine Cadillac's fate.

"And, yeah, I think they'll make it, although they'll probably not get back to 250,000 (annual sales)."

He thinks Cadillac should split into two brands: One for its traditional older buyers, the other targeted at the younger crowd.

"They've made a lot of goofs, and now they have the legacy of that," he says. "It takes years to get back your customer base, but if you have a successful product, you can build on that."

Drew Winter is editor of Ward's Auto World. David C. Smith is editor-at-large of Ward's Dealer Business and Ward's Auto World.

Cadillac General Manager John Smith admits it will take a hefty dose of cash and new products, not just a new logo, to boost the division's image. And it will take a bigger commitment from dealers, as well.

Cadillac is embarking on a plan to redesign its dealerships and launching a new advertising campaign in November.

"Cadillac is changing," says Mr. Smith.

The first glimpse of the new dealership look will appear sometime during the next six months, and a full pilot dealership will be in place by the end of 2000.

The division wants its vehicle showrooms to make a visual statement to reflect its new "art and science" theme and hint at the direction of future product design.

To improve the "retail experience," Cadillac has hired Andree Putman, an internationally known contemporary designer, and two architectural firms to help with the dealership redesign. Ms. Putman, who operates from Paris, will focus primarily on the interior design. Booziotis & Co. of Dallas and Hillier Group of Princeton, NJ, one of the largest architectural firms in the country, will handle the exterior work.

The transformation won't come cheap. Just how many dealers will want to make the seven-figure investment isn't known, nor is it clear what incentives GM will provide to offset some of those costs.

"We are not just talking looks but the entire customer experience in the showroom," a Cadillac spokesman says.

- By Said Deep Editor Ward's Automotive Reports

About the Author(s)

Drew Winter

Contributing Editor, WardsAuto

Drew Winter is a former longtime editor and analyst for Wards. He writes about a wide range of topics including emerging cockpit technology, new materials and supply chain business strategies. He also serves as a judge in both the Wards 10 Best Engines and Propulsion Systems awards and the Wards 10 Best Interiors & UX awards and as a juror for the North American Car, Utility and Truck of the Year awards.

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