(Copyright 2014, TheDetroitBureau.com)
Cadillac will go through a major strategic realignment that will see it spun off as a separate business unit and move its headquarters to New York City, the General Motors brand will confirm today.
While key operations, including sales, marketing and product planning, will move to the Big Apple, Caddy’s design and engineering efforts will remain in the Motor City. And they will be extremely busy in the years to come, according to Johan de Nysschen, the new Cadillac global brand chief who spoke to TheDetroitBureau.com in an exclusive interview.
The one-time “standard of the world” is getting ready to unleash a product blitz intended to challenge its ambitious German rivals, covering everything from a new entry-level model to the upper reaches of the luxury market. There will likely be new coupes, convertibles, crossovers and performance cars, according to de Nysschen – though the South African-born executive cautioned that the cost could be significant, at least initially. “We want to put a little distance between Cadillac, as a premium brand, and the rest of the brands in the General Motors stable,” said de Nysschen, explaining the decision to move Cadillac to New York, where GM itself once had a large presence on the corporate management side.
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In all, about 60 of its employees will be relocated. That list will include de Nysschen, newly appointed vice president of sales and service Jim Bunnell, and Uwe Ellinghaus, Caddy’s chief marketing officer. As has happened when other automakers — such as Nissan’s U.S. operations and Infiniti’s global management — have been uprooted, Cadillac could lose some of its white-collar team, but de Nysschen said that would provide “an opportunity to have a rejuvenation and attract new talent.”
The maker won’t be abandoning its Detroit home base, the Cadillac chief stressed. In fact, it will become a larger organization overall, and will “backfill” 30 of the jobs going to NY with new positions at the General Motors headquarters on the Detroit river and elsewhere in Michigan. Meanwhile, there will likely be a significant expansion of the Cadillac product development team, especially at the GM Technical Center in the suburb of Warren, Michigan.
De Nysschen is planning an unprecedented product blitz that will target much of what industry planners like to call the “white space” it isn’t covering currently. The maker now sells just two utility vehicles, three sedans and a single V-Series performance car. That’s a pittance compared to what is offered by the luxury market’s dominant German brands – all of whom have committed to expansive rollouts of their own in the years to come. Mercedes-Benz, for example, has confirmed it will bring to market 30 all-new or significantly redesigned vehicles by 2020, one per quarter.
While de Nysschen didn’t offer a specific count, he broadly outlined what Cadillac will likely follow with. That includes a “must-have” entry-luxury model – slotting in below the current base Cadillac ATS — to challenge the likes of the hot-selling Mercedes CLA sedan, as many as three new crossover-utility vehicles, and an assortment of vehicles targeting smaller niches, such as coupes, convertibles and performance cars.
(Click Here for more on Cadillac’s coming product assault.)
The maker only last week announced it will begin production of an all-new “flagship” model late in 2015 at its Detroit-Hamtramck Assembly Plant. It will target the likes of the Mercedes S-Class, BMW 7-Series and Audi A8. But Cadillac’s aspirations reach even higher and, revealed de Nysschen, “I quite readily envision a Cadillac positioned above the car we’ll be launching next year.”
While the executive didn’t put a price tag on the effort, it will clearly run into the billions of dollars. Freeing up that sort of cash from GM management and its board of directors underscores the strong support de Nysschen got when he was recruited away from Infiniti, the Nissan luxury brand he was running, this past summer. Company insiders say the new Cadillac czar was personally sought out by GM President Dan Ammann.
(Infiniti names new boss to replace de Nysschen. Click Here for the latest.)
Whether de Nysschen can maintain both management and shareholder support as he puts the pieces of his plan together remains to be seen. Despite the launch of several new products over the last year, Cadillac sales have slipped in 2014, in sharp contrast to the overall recovery of the American automotive market.
And de Nysschen cautioned Caddy could lose a bit more ground in its traditional home market as it realigns its global strategy. For one thing, he wants to “get incentives under control,” and sell Cadillac products based on their value, rather than the expectation there will be “large incentives in the trunk.”
But while that could initially mean a further sales slide in the U.S., he envisions significant growth abroad. Though it only recently launched production in China, de Nysschen said Cadillac could very well sell 100,000 vehicles in China in 2015, about two-thirds of its anticipated U.S. volume this year.
Longer-term, the expectation is that Cadillac will start matching the performance of top-line luxury brands, such as Audi, some of which deliver as much as half of their parent companies’ profits – and even though luxury brands account for just 10% of global auto sales.
In fact, a resurgence by Cadillac could become even more critical in the years ahead. With a 54.5 mpg Corporate Average Fuel Economy standard coming to the U.S. in 2025, de Nysschen warned that GM could see a fall-off in demand for its pickups and other large – and high-profit – truck models, such as the Chevrolet Silverado pickup. It will become all the more critical, then, to provide an earnings substitute. And that is where a resurgent Cadillac can step in, he said.
One of the first challenges the new Caddy chief will face is pulling off the move to New York. Such relocations can be difficult, as he learned while leading Infiniti. And not all work. At the turn of the Millennium, Ford Motor Co. tried shifting the base of operations for its global luxury brands, collectively known as the Premier Automotive Group, to suburban Los Angeles. It eventually reversed course and eventually sold off Jaguar, Land Rover, Aston Martin and Volvo. Ford is currently struggling to salvage its domestic luxury brand, Lincoln.
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De Nysschen said he has studied what happened at other makers and hopes to pull off Cadillac’s relocation more effectively. But with such a broad realignment envisioned, GM’s flagship brand clearly has its challenges ahead.
One of the key lessons, he stressed, is that “relocation isn’t an end to itself. If you don’t change the way you do business, all you do is add an order of complexity to your business. You have to change the way you do business.”
It appears de Nysschen’s plan leaves little unchanged. Whether it will work, however, could take several years to determine.