A Detroit luxury car, remade in New York?

Published 12:00 am Sunday, August 23, 2015

Can a South African-born former Audi executive, who recently spurned Japanese masters in Hong Kong, lead a Detroit luxury brand back to greatness — and from a new base in Manhattan, New York?

Johan de Nysschen and Cadillac are about to find out.

After a string of failed revival attempts through the ’70s and ’90s — think the Cimarron — Cadillac harnessed aggressive design and performance to put its old-timey image largely in the past. Yet its once-impressive comeback has stalled. Cadillac’s U.S. sales have slumped 2 percent in 2015, even as its German rivals Mercedes, BMW and Audi set one sales record after another.

For General Motors, another post-bankruptcy executive shake-up was in order. Last fall, it hired de Nysschen, one of the industry’s most prominent leaders, who helped lead Audi of America to sales heights before Nissan chose him to lead its Infiniti division from offices in Hong Kong.

But de Nysschen cast his gaze eastward. After more than a century in the Motor City, Cadillac is revamping as a separate GM unit, moving to new Manhattan headquarters to take the pulse of this luxury-crazed international city. GM will also invest $12 billion by 2020 to develop eight new Cadillac models, including the crossover SUVs that have been conspicuously absent from the lineup.

“How is it possible that we have so few crossovers from this iconic American luxury brand?” de Nysschen said. “The Germans have more than I can count on two hands.”

One answer, he suggests, is that Cadillac has often been overshadowed in GM’s Midwest empire. Cadillac design and engineering will remain in the Eero Saarinen-designed GM Technical Center in suburban Detroit, itself the recipient of a $1 billion investment and up to 2,600 new jobs. But de Nysschen insists that the relocation isn’t window dressing.

Staying in Detroit, “We’d be such a small part of the constellation that we’d get whittled down to the lowest common denominator,” de Nysschen said. “By changing geography, you force a change.”

Michael Harley, editor-in-chief of Autoweb, said that “Cadillac has tried to revive themselves over and over, but it was always a halfhearted effort. But by splitting the brand off, they’re taking a more serious approach.”

The less-provincial outlook includes another bid to make Cadillac an international player by tailoring cars to buyers in China and Europe. To become a true “challenger brand,” de Nysschen said, it must also beat the Germans at the global luxury game they dominate.

Award-winning models

Cadillac models like the ATS and CTS sedans have received awards and critical praise for outperforming those German rivals. The buyers haven’t always followed. When the price of the enlarged and lavishly re-engineered CTS shot into BMW and Mercedes territory, at more than $60,000 for loaded versions, not enough consumers were prepared for the richer version, de Nysschen said. Cadillac was forced to idle a Michigan assembly plant for three weeks to trim bloated inventories of the slow-selling ATS and CTS.

In hindsight, de Nysschen said, Cadillac might have simply renamed the CTS to make clear that it was more deluxe, ambitious and, yes, expensive than before.

Harley said that the CTS’ struggles show how hard it is to compete against German brands that sell not just on design or performance, but also on their badges and status.

“De Nysschen has to sell the image, the idea that you want a Cadillac in your driveway instead of a Mercedes,” he said. “And that’s a tough road.”

That disconnect between Cadillac’s critical standing and its lagging reputation and sales helped drive the change of perspective for its sales and marketing teams. One goal, de Nysschen said, is to draw on luxury experts beyond the auto industry and to “see and live the lifestyle of actual luxury customers.”

“New York isn’t where American trends begin; this is where global trends begin,” he said.

Jessica Caldwell, director of industry analysis for Edmunds.com, said that Cadillac continued to suffer from a perception issue.

“Cadillac is making pretty compelling cars, but the sales needle hasn’t moved too much,” she said “It can be turned around, as Audi has done, but it takes a long time.”

Industry watchers, especially in Detroit, have expressed skepticism over the corporate move, which could eventually see perhaps 200 employees on the leased top two floors of 330 Hudson St. in Manhattan. But Caldwell said the relocation could help revive Cadillac by attracting young talent from top Eastern universities who cannot be lured to struggling Detroit.

Risky business

“At this point, Cadillac has to take some risks,” she said.

Some risks have paid off. Others have not. A redesigned Escalade, that club-friendly, high-wattage SUV, scored an unexpected hit in an era of bargain gasoline prices. Those same fuel prices did no favors for the ELR: The $75,000 plug-in hybrid coupe bombed so badly in showrooms that Cadillac had to chop $9,000 from its price. And the brand’s CUE infotainment system has been reviled by critics for its balky operation.

De Nysschen said Cadillac must continue to take calculated risks and even accept setbacks “that the old GM wouldn’t have contemplated.”

“If you punish setbacks, you stifle innovation,” he said.

To that end, Cadillac is developing its own twin-turbocharged four- and eight-cylinder engines that won’t be shared with other GM brands.

Late this year, Cadillac will introduce the XT5, a midsize crossover, to replace the aging SRX. That will be followed by the CT6, a full-size luxury flagship in the vein of the formidable Mercedes S-Class. The rest of the cavalry, including critical small cars and crossovers, will arrive from late 2018 through 2020.

It is a long view, but as de Nysschen sees it, a healthy Cadillac is crucial to GM’s success. Around the world, he said, luxury cars deliver only 10 to 12 percent of industry sales but 50 percent of its profits. Cadillac is GM’s only luxury brand, and without its high profit margins, GM will struggle to fund critical technology and the low-margin economy cars that it must sell to meet rising corporate fuel economy standards.

“If we wait even 10 years, it will be too late,” de Nysschen said.

To woo buyers in Europe, where Cadillac has struggled to gain a foothold, the brand will develop diesel engines and right-hand-drive models. As Cadillac styles and engineers its global cars, the enormous Chinese market will never be far from mind.

Domestically

In the United States, Cadillac will tolerate lower sales volumes for now, including fewer sales to rental fleets, to bolster its image and the values of new and used models.

That effort is beginning to pay dividends, Caldwell said. Cadillac’s average retail transaction price has risen 6 percent over the last year to $53,700, far beyond those of Audi or Lexus and close to Mercedes and BMW at around $55,000.

As de Nysschen moved from temporary quarters in Detroit to Brooklyn, he got his own taste of rising prices — for New York real estate. Over dinner at a Japanese restaurant in the Williamsburg neighborhood, de Nysschen said he had been outbid on multiple properties, mainly in Manhattan, before buying a home in Hoboken, New Jersey, that he and his wife, Anna, who hails from suburban Detroit, are renovating.

“Someone clearly has a lot more money than me,” he said, bemoaning his luck.

Spoken like a true New Yorker.

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