Thursday, September 25, 2014

Cadillac Loves New York

Will Someone tell Cadillac that Detroit is Back Detroit is back. Dan Snyder is boosting downtown Detroit. The Big Three is running on full, boosting production, employment and profits. Chrysler’s Made in Detroit ad is propping up Fiat. Ford survived and prospered without a bailout. GM is making money despite the $.59 ignition switch. Cadillac though is in a 17 year decline. Changing brand names hasn’t helped. Aside from Escalade, can you name a Cadillac brand? Free association: If I throw out a car name, what first comes to mind? BMW? Mercedes? Porsche? Volvo? Infiniti? Now, what about Cadillac? 1997 was the last year Cadillac led luxury car sales in the United States. The 112 year old brand is on a 17 year slide. Johan de Nysschen was appointed Cadillac’s President in August. He came from Infiniti, having previously worked for Audi. He was born in the other USA, the Union of South Africa. He announced a few days ago that Cadillac’s headquarters was moving from Detroit to SoHo. Johan loves New York. Cadillac’s problem is that rebadging a droll Chevy into an overpriced Caddy doesn’t compete with the Germans. Or Japanese. Or Koreans. Cadillac’s problem is that its perceived quality does not match that of the foreign cars, as illustrated by the Cimarron. United States sales for luxury cars through August this year show BMW with 211,005 Bimmers, 34,969 Minis and 600 Rolls, Mercedes slightly below with 221,471, followed by Lexus with 198,831 despite its the quality problems. Audi sold 116,066 cars, about 2,000 ahead of Cadillac’s 114,008, which barely led Acura’s 105,918. Infiniti, de Nysschen’s previous employer, sold 77,043 cars. Luxury car sales are up 15% this year. Cadillac is down 4.7%, a drag on GM. Cadillac’s only consolation is that it outsells Lincoln almost 2:1. The move has a fatal problem. Only sales and marketing is moving to New York. Product development (design and engineering) stays in Detroit. De Nysschen recognizes the need to resurrect Cadillac as an “aspirational brand.” Johan explained the move to SoHo: “There is no city in the world where the inhabitants are more immersed in a premium life style than in New York.” Mary Barra, GM’s CEO, added: “When you think about New York, it’s the perfect place to be. It’s where luxury is defined. It’s trend-setting – so I think it’s going to be very, very positive.” Mark Reuss, GM’s head of global product development, purchasing, and supply chain, echoed them. He said it’s time for “some fresh thinking for Cadillac.” A GM press flack described the SoHo site as a “multipurpose brand and event space in conjunction with modern loft offices located in the heart of a city renowned for establishing trends and setting standards for the global luxury market.” Has he heard of Rodeo Drive? GM’s management dilemma is that, having just hired de Nysschen to rejuvenate Cadillac, it has to stick with him, at least for awhile. It’s too early to admit yet another mistake. Has anyone told de Nysschen that 15 competitors have design studios in Southern California? Mercedes is in Carlsbad, BMW in Newbury Park, and Audi in Santa Monica. If he’s interested in chic, hip, and vibrant, if he’s interested in appealing to the pre-62, affluent non-white males, Silicon Valley, Seattle or Hollywood are where to go. There’s also San Francisco where no Detroit auto company has a dealership. He recognizes the need to leave “behind our traditional customer base,” but he won’t find the new base in SoHo. If he’s interested in selling Cadillacs, he should walk around SoHo and count with the fingers on one hand, the Cadillacs in SoHo. Fletcher Jones, the largest Mercedes dealer, is here in Orange County. It’s already sold over 5,000 Mercedes this year, the equivalent of 5% of all U.S. Cadillac sales. Fletcher Jones recently opened an Audi dealership in Beverly Hills. If he’s entranced by New York City, he could ask Chrysler why they dropped the Fifth Avenue, Manhattan, and New Yorker. He should ask how many Cadillacs Potemkin sells in Manhattan, and then check out BMW of Manhattan’s satellite office at 57 Wall Street. GM once had an alternate headquarters in Manhattan. The lobby now hosts the F.A.O. Schwartz flagship store. The plaza has a famous Apple Store. Johan de Nysschen is no Steve Jobs.

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