Since recovering its footing after its high-speed bankruptcy overhaul in 2009, General Motors Company (NYSE:GM) has been solidly profitable — but its profits have so far fallen well short of those booked by its giant global peers Toyota Motor Corporation (ADR) (NYSE:TM) and Volkswagen .
GM sells more cars than VW and almost as many as Toyota, but its bottom-line results haven’t been in the same league as either — a trend that is expected to continue when the General reports its full-year 2012 results later this week.
There are lots of reasons for GM’s relatively dismal profitability, and GM CEO Dan Akerson and his team are pushing to address most of them.
One in particular that will be getting more attention shortly: A much-needed overhaul of GM’s storied but tattered luxury brand, Cadillac.
Cadillac is crucial to GM’s revival
Over the weekend, GM executives speaking to Cadillac dealers at a conference said the company is targeting a 35% year-over-year retail sales increase for Cadillac in 2013.
That’s a big jump, but it’s critical to GM’s drive to increase profit. The 2013 target is part of an ongoing push to establish Cadillac as a global peer to powerhouse luxury brands like VW’s Audi and Toyota’s Lexus, especially in markets like China, where Ford Motor Company (NYSE:F) is beginning a similar push with its own luxury brand, Lincoln.
In a nutshell, here’s why Cadillac is crucial to GM’s revival: Margins on luxury cars are much higher than those on mainstream vehicles. A healthy luxury brand can account for an outsized share of an automaker’s earnings. For instance, Audi represents a small fraction of VW’s global sales but accounts for nearly half of the company’s global profits.
GM would dearly love a piece of that action. As part of its Cadillac push, GM plans a slew of new models. Those plans have already yielded positive results: The acclaimed XTS and ATS sedans were launched in 2012.
Joining them soon is an all-new version of the midsize CTS, the best seller among Cadillac’s cars. Cadillac’s marketing chief, Don Butler, told trade magazine Automotive News that the new CTS would make its debut at next month’s New York Auto Show and would arrive at dealers this fall.
That’s important. Here’s why.
This new Cadillac is really important
The current CTS was launched in 2008, and it’s a good car — arguably the best product of pre-bankruptcy GM. It’s solid and comfortable, with a well-done interior and good handling.
The CTS was unveiled to mostly good reviews. But at the time of its debut, the CTS fell a little short of the cars GM was hoping it would compete with — no-excuses rides like BMW‘s 5 Series and the Mercedes-Benz E-Class. That gap has widened in recent years as BMW and Mercedes have pushed the bar higher while GM, attending to other priorities, has made few changes to the CTS.