WHERE DOES CADILLAC GO FROM HERE?
Sunday, April 22, 2018 at 01:48PM
Editor

By Peter M. DeLorenzo

Detroit. The news that Cadillac chief Johan de Nysschen parted ways with GM last week was a bit of a surprise, but then again, it wasn’t. Anyone who knows de Nysschen, and anyone who knows and understands the GM culture – or what passes for such – knew that it was just a matter of time before the relationship ran its course.

Tired of revamping Cadillac over and over again, and seeing it perpetually languishing in the U.S. market, CEO Mary Barra and Dan Ammann reached out to de Nysschen – the executive who was largely responsible for forging Audi into a formidable force in the U.S. market – where he was temporarily parked at Infiniti, which turned out to be an abbreviated stint after his Audi adventure. 

The GM executive team was ultra-aggressive in landing de Nysschen, giving him unprecedented freedom and carte blanche to turn the division around and a five-year contract. But after almost four years into it, the wheels came off, for myriad reasons.

First of all, even though revamping Cadillac was a 15- to 20-year project when looked at realistically, de Nysschen hit the ground running, hell-bent on accomplishing as much as he could for the brand, as fast as he could. Time was wasting, the competition was growing tougher by the minute, and Cadillac, except for a few notable instances, was losing ground at a frightening rate. And GM and the Cadillac dealers embraced the winds of change, going along with de Nysschen’s vision, at least for a while.

But de Nysschen’s brand of tough love was grating and hard to swallow. He demanded that dealers take the long view, and required them to make considerable financial sacrifices, like Project Pinnacle, in order to get where Cadillac needed to go. And de Nysschen’s personality was a complete “180” from what the dealers were used to as well. de Nysschen was viewed as being sober and dour, which, when you get to know him, couldn’t be further from the truth, because he is exceedingly bright and noteworthy for his droll humor and acerbic wit. A true glimpse of Johan came across in his social media forays, where he was blunt, sarcastic and entertaining. But he was never going to be the classic, back-slapping “dealer guy,” and that added to a lot of the dealers’ discomfort. 

But beyond that, the “all-in, all hands-on deck” attitude initially displayed by GM management seemed to wane about two years into Johan’s reign. After all, GM insists that it no longer wants to live in a world of 30-day sales reports, but who’s kidding whom here? GM is still deeply ingrained into the 30-day sales report world, and when Cadillac sales didn’t start to show much life beyond the monster sales performance of the Escalade after three years, the natives got restless and started looking at their watches. And once the grumbling and the rancor started in the Silver Silos – fueled by disgruntled dealers – it became a tidal wave.

But de Nysschen didn’t do himself any favors either. As I stated a number of times in my previous columns, de Nysschen’s quest to remake Cadillac in Audi's image was a nonstarter from the get-go. A product strategy that started with chasing the German ideal of a luxury-performance car not only ignored Cadillac’s historical legacy, but it emphatically stomped on it. 

(As for the move to New York, that idea originated well before de Nysschen arrived at GM in the summer of 2014. To be sure, Johan was given the “go/no-go” decision, and everyone consequently bought into the idea that to understand the luxury market you had to be in a luxury market. I don’t necessarily buy that. Yes, I could see putting a young marketing team there as idea generators, but you have to ask yourself this: If Cadillac had instead refurbished a warehouse space in Detroit with a historical connection to the origins of the automobile industry, wouldn’t they look like the mavens of hipness now? And then would the whole New York thing be missed? (How about no?) 

And the insipid, Audi-esque alphanumeric naming regimen didn’t help either. Cadillac was leaving great names from its past on the shelf, in favor of generic monikers such as ATS, CTS, and CT6. Consumers were confused enough as it was about the size of Cadillac vehicles and their close proximity to each other, and the lack of names made it even harder for consumers to figure things out. Example? The best-selling Cadillac by far is the Escalade. And this just in, it has a name. (Even Lincoln operatives have figured this out, abandoning their alphabet soup designations for real names.) Great Cadillac names were readily available and just sitting there, but the rigid adherence to the Audi playbook just wouldn’t allow de Nysschen & Co. to go down that road.

But then again, the pricing strategy that de Nysschen enforced for Cadillac might have been his most strategic error. I understand that de Nysschen and the True Believers at GM Design, Engineering and Product Development believed in their work and were proud of it, as well they should be. But that doesn’t mean consumers automatically understood it, and instead of pricing Cadillac sedans notably below their German competitors in order to start to make inroads in the segment, Cadillac sedans hit the market priced right on top of models from Audi, BMW and Mercedes-Benz, which just didn’t translate into a believable reality for most consumers. (The V series cars were another thing altogether, more on that below.) A perfect example of this? When the much-ballyhooed CT6 hit the dealers, too many of them had stickers in the $80,000+ range, and consumers were perplexed as to why. Yes, de Nysschen could justifiably point to higher transaction prices for Cadillac since he took over, but when you aren’t selling enough cars, it was a hollow victory at best.

Add all of these factors together and you have a recipe for Not Very Good. Barra and Ammann had committed $12 Billion to Cadillac’s turnaround, and even though there were a lot of positives introduced to the brand by de Nysschen, the results simply weren’t there, at least not notable enough or fast enough for GM operatives. 

And the pressure was getting ramped up, especially with Cadillac sales down overall in the U.S. market for the second year in a row, despite the fact that Escalade was a consistent hit. (Cadillac is doing well in China, but because of the joint operating agreements, the profitability just isn’t enough.) The dealers weren’t happy* and demanding more action in the market, meaning more aggressive incentives because they were getting their asses handed to them. In other words, de Nysschen’s pricing discipline had run aground, and they wanted relief. (*Let's be clear, dealers are rarely happy, but Johan got off on the wrong foot with too many of the dealers from the beginning and it never got better.) 

In the end, de Nysschen was given a list of issues that needed to be addressed, many of them clearly not consistent with his vision for the brand, so he agreed to disagree and walked, saying, “It happens. It’s not personal. It’s business.” He’s right, of course, and make no mistake Johan de Nysschen will surface again, as there are any number of car companies that could use his experience and visionary perspectives. 

But now, GM has tapped its former head of operations in Canada, Steve Carlisle, to run Cadillac. A longtime GM veteran, Carlisle will be giving a new set of marching orders, many of which will most likely move away from de Nysschen’s previous directional attachments.

But as you might expect, I have my own set of recommendations for saving Cadillac:

1. Move Cadillac in a new strategic direction. As I said previously, ignoring Cadillac’s historical legacy is a nonstarter and an egregious mistake. Despite decades of German automaking superiority, the Cadillac name still resonates around the world as one representing the best of the best. It may not live up to the classic moniker “Standard of the World,” but it’s still the legacy that must be pursued. Cadillac should stand for luxury, elegance, power and design leadership. In short, Cadillac should be allowed to be Cadillac. It doesn’t have to live up to some other car company’s ideals, because living up to its own historical legacy should be impetus enough to aspire to greatness. The True Believers in Design, Engineering and Product Development understand all of this implicitly. And it’s time to refocus their energies on creating the Best of Cadillac. 

2. Bring the names back. Starting with the established Escalade, rename the XTS the Fleetwood and go from there. Cadillac has a deep reserve of names (Eldorado, anyone?) along with more recent names like Ciel, Elmiraj and Escala. Names resonate. Names imbue character and personality. Cadillac has some of the best names available in this business. Use them. Now.

3. Gut the portfolio and start over. I’ve seen the new Escalade and it will continue to be a monster hit, if not more so, but from there big changes need to be made. Start by deleting the ATS and the CTS immediately. Then take the Fleetwood (formerly known as CT6) and give it an avant-garde, future-defining Cadillac skin. Cadillac won’t need another sedan if it’s done right. Do the same with the XT5; it’s nice, but nice isn’t anywhere near good enough. The XT5 needs to be better by half. The XT4? Start over. There’s no “there” there. Cadillac had time to make the XT4 a segment-leading product and it isn’t even remotely close, which is disheartening. 

4. Say goodbye to the V series. Look, as AE readers know, I like performance machines as much as anyone, and the CTS-V and ATS-V are some of the best driver’s cars in this business. They are examples of the kind of work GM’s best and brightest can do when they set their minds to it, and they are indeed impressive machines. But that doesn’t mean they need to be Cadillacs. In fact, their architectures would be fine starting points for the new Corvette Division that I have been talking about for more than five years now at least. This would take real vision, however, and it would be a real departure in order for GM management hierarchy to seriously consider it. But if Porsche can do it, I firmly believe GM’s True Believers could do it just as well if not better for a new Corvette Division. 

5. Delete the Cadillac Racing program. As most of you out there know, I am a huge proponent of racing as a genuine marketing tool when it is applied properly. It benefits Engineering Research and Development, and it’s the most worthwhile training ground for young engineers that there is. But that doesn’t mean every racing program has merit and context. Let’s face it, GM Racing’s decision to compete in IMSA’s top prototype series with “Cadillac-branded” prototypes was a politically expedient one that really had nothing to do with Cadillac as a brand. And it really will have nothing to do with the Cadillac brand going forward. When the new mid-engine Corvette arrives in IMSA's GTLM class, that would be the time to re-brand the GM Racing prototypes as well.

6.  And Cadillac marketing needs to be overhauled too. A new divisional strategy will require a new marketing strategy, because flipping a switch to "tune up" the advertising never works, especially in this situation. And it's up to Deborah Wahl, Cadillac's new CMO, to figure it all out. She has the relevant experience, but does she really know what she's getting into? Does she understand that Barra and Ammann fundamentally do not believe in the power of marketing and advertising? At least not enough to hire an actual CMO for the executive suite, who would then lead all of the divisional marketing efforts? Why do you think they leave it to the divisions? Because they don't want another seven-figure salary parked in the executive suite, and they pay dearly for that misguided notion every single day. Does Cadillac marketing and advertising need to be overhauled? Yes, of course it does. But without a carefully thought-out strategy that would point Cadillac in the right direction, none of my previous points will matter one bit.

Ms. Barra and Messrs. Ammann and Carlisle need to ask themselves the following hard questions: What is Cadillac? Better yet, what should Cadillac be about going forward? Then instead of paying lip service to the brand they need to become True Believers, because the Cadillac name has resonance and power and a genuine historical legacy that could and should become the foundation for greatness again. 

And that’s the High-Octane Truth for this week.

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