General Motors Company (GM), Toyota Motor Corporation (ADR) (TM)…Can This Really Compete With Mercedes and BMW?

The all-new 2014 Cadillac CTS is set to arrive at U.S. dealers this fall. Image source: General Motors (NYSE:GM).

General Motors Company (NYSE:GM) CEO Dan Akerson didn’t know a whole lot about the auto business when he joined the auto giant’s board in the wake of the company’s 2009 bankruptcy. But it’s clear that he’s learned a lot since. One of the things he’s learned is that automakers with strong global luxury brands make more money. That’s because luxury cars, generally speaking, sell with fatter profit margins than regular cars.

Making more money is of great interest to Akerson these days. General Motors Company (NYSE:GM) has been solidly profitable for a while now, but its profits haven’t been as strong as Akerson and General Motors Company (NYSE:GM)’s shareholders would like. More to the point, they haven’t been nearly as strong as those at GM’s global peers Toyota Motor Corporation (NYSE:TM) and Volkswagen, both of which have strong luxury brands: Toyota Motor Corporation (NYSE:TM)’s Lexus and VW’s Audi.

General Motors Company (NYSE:GM), meanwhile, has Cadillac. But more and more, this isn’t your grandfather’s Cadillac. GM is making a big push to turn Cadillac into a no-excuses global luxury-car contender.

A surprising product revival, with global aims
Recent Cadillac models, like the all-new CTS (shown above) that GM unveiled last month, have shown that General Motors Company (NYSE:GM) is putting some deep thought and serious global sophistication into its once-tired luxury brand.

Gone are the tufted velour seats, pillowy rides, and white vinyl roofs of retirement-community Cadillacs of yore. The latest Cadillacs are serious luxury cars in the modern idiom, combining lush interiors with sporty handling — and, increasingly, materials and build quality that rival the great German luxury brands.

One by one, the cars that Cadillac will need to be truly competitive with the likes of BMW are coming. Last year’s ATS sedan was General Motors Company (NYSE:GM)’s first-ever serious competitor to BMW’s much-lauded 3-Series — and some reviewers were shocked by how well the ATS turned out.

Now comes the CTS, first shown in New York in March and expected to arrive at dealers this fall. Reviewers haven’t had a chance to drive it yet, but it looks — on paper and in the metal — like another big step forward for the brand. Next up: The ELR coupe, a sporty and luxurious cousin of the Chevy Volt, and an all-new replacement for the big Escalade SUV, due next year.

After that, things could get very interesting. Rumors hint that GM has a series of big Cadillacs under development, to be built on a new rear-wheel-drive platform designed to match or beat cars such as the vaunted Mercedes-Benz S-Class. Those cars could start to appear by mid-decade, and at that point Cadillac could be ready to go head-to-head with the best in the world — all over the world.