GM Striving to Make Inroads in the Global Luxury Market
Drive around any European or Asian capital, and you’ll rarely see a Cadillac. The only Cadillacs in Paris or Tokyo are likely to be driven by the U.S. ambassador or flown in for U.S. presidential visits.
And therein lies a problem of stretch-limo proportions for General Motors Corp.: It lacks a potent luxury brand it can sell around the world, at a time when the luxury segment is emerging as one of the auto industry’s hottest growth areas.
Neither of GM’s luxury brands--Cadillac and Saab--is a global contender against the likes of DaimlerChrysler brand Mercedes-Benz, BMW or Volkswagen unit Audi. From the United Arab Emirates to New Zealand, even Rolls-Royce and Bentley have more cachet than GM’s contenders.
In the luxury arena, GM is getting hammered by domestic rivals Ford Motor Co. and DaimlerChrysler, which have strong-selling high-end brands.
Cadillac, for decades the brand leader in the U.S. luxury market, has fallen from grace. The No. 1 luxury brand up to 1997, Cadillac has sunk to No. 4 as Toyota Motor Corp.’s Lexus, Mercedes and BMW have raced ahead with a wider range of sedans, sports cars and trucks. Cadillac’s sales have fallen from a high of 350,000 in 1978 to less than half that--172,000--last year.
Sales of Saab, which has had only two models for what seems forever, have grown under GM ownership but are trailing off.
Meanwhile, sales of Ford Motor’s Jaguar, Land Rover and Volvo brands are growing steadily around the world, and Mercedes’ image is the stuff of legend.
“GM does not have a global luxury brand,” said Jim Hall, vice president of consulting firm AutoPacific in Detroit. “Unless they can get that going, they’re going to lose out in the luxury market, which is going to be the hottest sector in the coming two decades.”
Cadillac has focused on trucks the last couple of years, first catching up to Ford Motor’s Lincoln Navigator sport utility vehicle, then designing an all-new Escalade SUV that has caught on well.
“We were late to the game with the full-size utility,” said Mark LaNeve, Cadillac’s general manager. “We don’t want to be late to the next exploding segment, if it’s the $20,000-to-$25,000 luxury segment. If you can call that luxury.”
Thus, Cadillac is in the middle of an assault on the wallets of the wealthy and moderately wealthy with some new high-tech vehicles it hopes will attract a younger following at home and abroad.
And Saab is finally moving toward something it has long needed to resuscitate the brand: an SUV-like crossover.
Cadillac recently turned the corner on design, sending to showrooms the just-released CTS sedan and Escalade, with their chiseled, angular looks marking a watershed for Cadillac styling.
And Cadillac plans to keep pumping it out. A pickup version of the Escalade recently went on sale, and an even bigger version based on the hulking Chevy Suburban is planned.
“Our competitive advantage derives from our North American vehicles that Mercedes, Lexus and Volvo don’t make and can’t sell in their home markets,” LaNeve said. “First and foremost, we have to be competitive in our home market.”
He slices the luxury passenger car market into segments that have been overrun by imports, and said emphatically that Cadillac already is or will be in every one of them--entry luxury with the CTS; prestige luxury with the Seville; ultra luxury with the XLR roadster due out next year; and mid-luxury utility crossover with the wagon-like SRX in 2004.
“This is where all the growth has been in the last 20 years,” LaNeve said. “It’s the reason we slipped, but it’s the reason we think we can come back,” he said, adding: “We’ll be global with our new vehicles.”
As for Saab, the Swedish marque offers what is called good “brand equity”: a strong, upscale image of safety and environmental consciousness. In the past it was noted for being different with the somewhat quirky designs of the former 900 and 9000 models.
But the company hasn’t made money for years, and Saab’s design has become nondescript with the current 9-3 and 9-5 models.
Saab, of which GM bought 50% in 1990 and the rest in 2000, also has suffered by being on the sidelines of the truck boom. It has two cars that perform well--the turbocharged, 230-horsepower 9-5 Aero can hit 156 mph--but tend to be pricey.
Why pay $40,000 for a 9-5 Aero wagon when you can get a 212-horsepower Subaru Outback wagon with all-wheel drive for $10,000 less?
Saab’s U.S. sales peaked in 1999 at 39,500, falling to 37,500 last year. Peter Augustsson, chief executive of Saab Automobile, said he’s confident he’ll boost Saab’s global sales from 126,000 last year to 200,000 in four or five years, including 70,000 in U.S. sales.
But to get there he’ll need a wider product lineup, including a bigger vehicle that can carry more people and cargo, a direction that Swedish rival Volvo has taken with its new XC90 SUV.
And that’s just what Saab’s going to get. “You will see a crossover from Saab,” Augustsson said.
Saab has been showing two concept cars, the 9X and 9-3X, that give an idea of the shape of things to come. They are of the “two box” type of design--wagon-like, as if a smaller box (the front end) were placed in front of a larger box.
“The two-box shape is very, very important, not least when stretching forward in design language,” Augustsson said. But “a truck-based SUV you will never see from Saab,” he added.
The crossover will be based on a passenger car to retain nimble steering and better gas mileage.
Saab’s crossover “is probably the way to go,” said Michael Ward, an auto industry analyst with Salomon Smith Barney. BMW, Mercedes and Honda Motor Co.’s Acura all have smaller SUVs, he noted.
Saab’s limited availability remains an obstacle, Ward said.
“They do have a global reach, but the point is they distribute basically on the East and West coasts and not ... a lot in between,” he said.
Saab could sell through or alongside Cadillac dealers, a plan that was announced for Europe last fall but was scrapped for several reasons.
Cadillac first needs to refine its dealer network.
“I think the dealers have gotten sluggish and not competitive. They look antiquated,” Ward said. “People my age don’t walk into Cadillac dealerships if there’s a brand-new, shiny Lexus dealer nearby, where they treat customers in a very different way,” the 42-year-old said.
It’s not that the cars aren’t good, he said.
“Take the Seville versus the [BMW] 5-Series. Pound for pound, the Seville’s a better car,” he said. “But you don’t see many people buying them.”
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GM’s Luxury Problem
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