Cadillac Allante Owner Fights GM

Cadillac has always been synonymous with luxury as only an American car manufacturer can provide it--big, plush and showy.

Its cars rank highly against their European and Japanese competition, scoring above average in many quality and satisfaction surveys.

But that’s not true for Paul O. Gaddis, Michael Freeman and others like them, who bought into a guaranteed resale-value program that Cadillac offered and then allegedly reneged on.

Although Cadillacs and many other American cars boast good quality, they tend to depreciate faster than European and Japanese cars in the same class. And depreciation is the largest single cost of operating a car.

Cadillac came up with a novel plan in late 1986 to obviate this disadvantage. When it introduced its new $55,000 Allante model, positioned to compete against the Mercedes-Benz 560SL, Cadillac offered a guaranteed resale-value plan. Under the plan, General Motors said it would pay the difference on trade-in if the Allante depreciated more than the the big German-made sedan.

But eventually, Cadillac discovered it was losing thousands of dollars on every Allante traded in by owners--by some estimates, $14,000 per car. So in September, 1991, Cadillac announced it would no longer peg the guaranteed resale-value of the Allante to the Mercedes, but rather to the Jaguar XJS convertible.

At least some Allante owners, who said they purchased the car specifically because the guaranteed resale plan was pegged to the Mercedes, were furious.

A Cadillac public relations man defended the policy change, saying that the Mercedes 560SL design had been altered and the price increased. As a result, “It was hardly depreciating at all.” In addition, the Jaguar was more closely priced to the Allante, the Cadillac representative said.

But Allante owners viewed the Jaguar skeptically, because it was subject to greater depreciation.

Several months after Cadillac changed the plan, Freeman filed a $100-million lawsuit against General Motors in Los Angeles County Superior Court. Freeman demanded a refund of his $41,000 purchase price, civil penalties of $82,000 and restitution to all California purchasers of Allantes in an amount estimated to exceed $100 million, said Jonathan Justman, Freeman’s attorney.

The suit was settled earlier this month, but the terms of the settlement could not be disclosed, Justman said. The gag agreement means that Freeman most likely settled on his own account and without restitution for others.

Meanwhile, Gaddis, another aggrieved Allante owner, figures that GM attorneys probably had a legal escape clause in the resale plan, but he objects to it nonetheless as “breech of ethics.”

Ironically, Gaddis has few complaints about his Allante. The change in the resale plan, however, has cost him $10,000, he figures.

A professor of management at the University of Texas’ graduate management school, Gaddis thinks he could teach GM a few lessons in management.

“I wrote a letter to the marketing manager for Cadillac and sent a copy to the executive committee of the GM board protesting that it was breeching a moral obligation they had to owners,” Gaddis recalled.

In return, he said he received a “rude” telephone call from a Cadillac official and subsequently received a cryptic letter from a GM public relations representative thanking him for his concern about GM’s fortunes.

“It is true what people say about GM. It is hard to get their attention,” Gaddis said.