Cadillac CTS revamped: Can the brand's savior strike again?

The 2014 Cadillac CTS was unveiled ahead of The 2014 Cadillac CTS was unveiled ahead of the 2013 New York International Auto Show. Photo Credit: General Motors

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General Motors Co.s new Cadillac CTS, the sedan that helped revive the luxury brand when it debuted more than a decade ago, will weigh less, go faster and be more fuel efficient as the company pushes to compete against Audi and BMW.

The 2014 CTS, with a lower and sleeker look and revealed March 26 ahead of todays New York auto show, is the third new sedan by Cadillac in the past year as GM tries to bolster the brand in the U.S. and China. Its part of Chief Executive OfficerDan Akersons strategy to make Cadillac and Chevrolet the companys two pillar brands globally.

GM needs a stronger luxury brand to better compete against Volkswagen AG, especially in China, where VWs Audi brand outsold Cadillac last year by more than 10-to-1. The new CTS, which is five inches (13 centimeters) longer and has more horsepowerthan its predecessor, is better equipped to compete than before when it was too big for the compact market and smaller than the mid-size segment.

We have to demonstrate that weve taken it to the next step, Mary Barra, GMs product development chief, said in an interview. CTSs role is critically important.

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The CTS, which comprised 31 percent of the brands U.S. sales last year, has been an important vehicle for GM over the past decade. Its sharp angular styling with vertical headlights in 2002 attracted buyers, giving currency to the notion that GMcould save Cadillac after it had fallen from the best-selling U.S. luxury brand in 1998.

The vehicles quality and dependability have also been bright spots for the company. Consumer Reports in its April issue gives the current version of the car a recommended buy and calls it as capable as its German rivals.

Positively Shocking

It shocked people when it came out, said John Wolkonowicz, an independent auto analyst based in Boston. It breathed new life into the brand and helped, along with the Escalade, bring the average age of the buyer way down. Prior to that, Cadillacwas a geriatric brand.

This years redesign, the first since 2007, comes as Detroit-based GM is trying to expand Cadillacs portfolio and make it more competitive against BMW in the U.S. and Audi in China.

The BMW 5 Series, with its 240 horsepower base engine aims to be a balance of luxury and performance, while the Audi A6 turns heads with its styling and interior comfort.

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The new CTS is going to give them three competitive sedans for the first time in, frankly, a long, long time, decades, Tom Libby, a Southfield, Michigan-based analyst for R.L. Polk & Co., said in a telephone interview. Its another step in makingit a more competitive luxury brand and moves them in the direction of the Germans.

Cadillacs Challenge

The challenge for Cadillac has been twofold: The brand has become a second-tier luxury player in the U.S. against Bayerische Motoren Werke AGs BMW and Daimler AGs Mercedes- Benz. To address that, GM developed the ATS to better compete against theBMW 3 Series in the high-volume compact segment and the new XTS to oppose the Mercedes S-Class in the large cars.

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The ATS has received good reviews, winning North American Car of the Year at the Detroit auto show in January along with a slew of positive mentions: A headline in the New York Times said the ATS was knocking on BMWs door and Motor Trend calledthe new car shockingly good.

Sales of the ATS in the U.S. have already topped the CTS and made it Cadillacs best-selling car, helping the brands deliveries in February rise 20 percent. About 60 percent of those buyers are new to GM with the top trade-ins coming from BMW, GMsaid.

Luxury Dynamics

The ATS is working just as we hoped: selling well and bringing new consideration to Cadillac, Bob Ferguson, Cadillacs global chief, said in a telephone interview last week. The CTS, I think, will continue that.

Soon out of the gate, GM faced pricing pressures with the new cars as BMW and Mercedes battled for sales in the U.S. with big incentives toward the end of last year.

Luxury cars, especially compact cars, are largely sold through leases with attractive monthly payments, said Jesse Toprak, an industry analyst with TrueCar Inc. in Santa Monica, California.

GM in July, as it was preparing to bring out the ATS, said it wouldnt get drawn into a pricing battle and that monthly lease prices would start at around $399. By December, GM was advertising lease offers as low as $299, according to Edmunds.com, awebsite that tracks auto incentives.

While GM isnt saying what the new CTS will cost, it will be more expensive than the current version, Ferguson said.

Maneuvering Room

The 2013 model starts at $39,095, according to GMs website. When the cars pricing was first announced in 2001, it was priced starting at $29,990 with the most popular features taking the cost to about $35,500.

The CTS will move us up-market, Ferguson said. While its moving up-market, consumers will still see it as a great value.

At the Cadillac event to unveil the new CTS, Ferguson told reporters the company expects U.S. sales of the brand to rise more than 30 percent this year.

Cadillac has less room to maneuver in pricing the new CTS between the ATS and XTS. The difference between average purchase price of the ATS compact and XTS large sedans this year so far is $12,821, according to Edmunds. That compares with a $46,210difference between BMWs 3 Series and 7 Series and $58,708 between Mercedess C-Class and S-Class.

A Challenge

Its almost like you have three models in two categories, Libby said of Cadillacs sedans. It is a challenge. To continue the strengthening and evolution of the brand, they have to avoid the fire sales and that will be difficult when you havethree products so close to each other.

The little wiggle room is even more noticeable when it comes to monthly lease prices.

The ATS, which continues to be advertised at $299 a month, is $30 less expensive than the lowest offer for the CTS at $329. The bigger XTS is advertised with a monthly lease price of $399.

Mercedes is offering monthly lease prices for the C-Class as low as $349 while the E-Class is $579 and S-Class is $1,099. BMW is offering monthly lease prices for the 3 Series as low as $339 while the 5 Series is $439 and the 7 Series is $689.

As Ferguson deals with positioning the vehicle in the marketplace, GM designers and engineers worked to address some of the criticisms against the current CTS and to differentiate it from the ATS and XTS.

While Consumer Reports praised the handling and interior of the 2013 model, it called the rear seat snug.

The new longer CTS provides more legroom, GM said. The car is about 1 foot (0.3 meter) longer and shorter than ATS and XTS, respectively.

Engines, Interiors

The car will be offered with three engine choices, including a new twin turbo V-6 that can get 420 horsepower, according to GM, and have magnetic ride control in the base version.

The interior will be offered in eight different styles with wood, carbon fiber or aluminum trim, GM said. New technologies include an optional automated parking assist that can self-park the vehicle in parallel spaces; automated braking that helpsprevent collisions; and driver awareness systems that include vibrating pulses to alert of imminent collisions, GM said.

This car will be a growth engine for Cadillac, Ferguson said.

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