GM to Spend $12 Billion to Fund New Cadillac Models by 2020

[akirby]

In other words: When GM screws up, they do it with gusto!

 

You gotta give them that. When they fail, they fail big!

[twintornados]

 

When ford makes a product or marketing mistake (like MKT) the impact is small - small investment and with some sales to offset the loss.

 

Except that MKT is still making money for Lincoln and Ford even if it isn't selling at a pace that some perceive as "a dog"....I have seen several MKT's running around so someone is buying them...

[Anthony]

 

Except that MKT is still making money for Lincoln and Ford even if it isn't selling at a pace that some perceive as "a dog"....I have seen several MKT's running around so someone is buying them...

 

 

I see tons of them every day.

 

 

 

 

 

 

 

.....Lined up to pick up travelers at the train station.

[sullynd]

MkT outsells SS and ELR combined.

[akirby]

MkT outsells SS and ELR combined.

 

That's not a very difficult task.

[Fgts]

I don't see how the numbers can work with this strategy. Cadillac will lose money year after year according to my calculations, that is if I am looking at it correctly.

 

 

With a best-case scenerio in mind and spending $2.4B per year just on funding new models;

 

 

1) If C. sells 200,000 units/yr. at an ATP of $50,000 for revenue of $10B and let's say profit per vehicle is $10,000 so that brand profit before new model investment (and taxes and the like) comes to $2B, then already a $400M loss per year is incurred when new-vehicle investment costs are taken into account.

 

 

2) A more likely case is sales of 150,000 units/yr./ for an ATP of $40,000 putting revenue at $6B and at best a per-vehicle profit of 10% or $4000, allows for a $600M profit before new-vehicle funding (and taxes) or a loss of $1.8B/yr. when new-vehicle investment costs are considered.

 

 

(both these sceneraios assume that new-vehicle funding in this case is additional funding beyond what GM would normally accrue to Cadillac.)

Have to ask how much is that profit is split into other divisions or platforms (example: Escalade money goes back into either a new Escalade or the GM truck program)? . Do anybody here knows how GM runs it's books now . They haven't lost money since the BK, they doing something right?.

[fordmantpw]

Do anybody at GM here knows how GM runs it's books now .

 

FTFY!

[akirby]

Have to ask how much is that profit is split into other divisions or platforms (example: Escalade money goes back into either a new Escalade or the GM truck program)? . Do anybody here knows how GM runs it's books now . They haven't lost money since the BK, they doing something right?.

 

How they run their books and how they should run their books are 2 different things.

 

How it should work is that each vehicle shares part of the cost of a shared platform, amortized over a number of years and that goes into the net profit calculation for that vehicle/brand/division along with other shared costs.

 

The other way is the first project pays the entire amount for the platform and the others that use it get it for free. Or they allocate the costs disproportionately which skews the real picture.

 

The danger with the latter method is you can end up making bad business decisions that lead to net losses or at least much lower profit at the corporate level.

 

There are also different ways to look at a business case for a specific vehicle. What I think gm does (based on previous decisions) is someone comes up with an idea for a vehicle and figures out how they can make and sell that vehicle at some profit. If there is profit it's green-lighted. This way you could easily make a business case for a Silverado and a Sierra pickup - separately. And I'm sure each one, by itself is profitable.

 

However, what GM should do at a corporate level is to compare having two separate trucks, brands and divisions versus having just one. This gives you big savings from designing, building and marketing two different trucks and provided you can maintain close to the same sales and ATPs you will have a much higher profit margin with one versus two. Therefore the better decision for the company is to only do one. But if you allow the business cases to be handled independently you won't get that analysis.

 

This is exactly what Ford did with it killed Mercury and you see the results. It didn't affect sales one bit and nobody outside of 2b2 misses Mercury and Ford's margins are better than ever.

 

I see this every day in the corporate world with the same results.

[aneekr]

Besides what other luxury domestic is putting our rwd sedans?

 

Tesla Motors, which is the other U.S. based luxury/premium automotive brand.

[grbeck]

I wonder if the real problem here is that the Germans are so far ahead that Cadillac, at this point, simply cannot catch up with them. Audi, BMW and Mercedes offer more models and pack ever-increasing amounts of technology into them. When Cadillac tries to go head-to-head with them - as it is with the ATS and CTS - it simply can't match their efforts across the board.

 

The billions that GM is preparing to spend may be both too much and not enough. It's too much for GM to bear, given the needs of critical models such as the Cruze, Malibu, full-size pickups and various crossovers. It's also not enough to really effectively take on Audi, BMW and Mercedes, who certainly aren't standing still.

Edited January 13, 2015 by grbeck

[akirby]

I wonder if the real problem here is that the Germans are so far ahead that Cadillac, at this point, simply cannot catch up with them. Audi, BMW and Mercedes offer more models and pack ever-increasing amounts of technology into them. When Cadillac tries to go head-to-head with them - as it is with the ATS and CTS - it simply can't match their efforts across the board.

 

I think it's more like this:

 

If you take the entire market of people looking for an ATS/CTS type vehicle

 

then remove the people who don't like the Caddy styling

 

then remove the people who are brand loyal to a competitor

 

then remove the people who simply won't consider a domestic mfr

 

then remove the people who don't like the Caddy dealership service

 

then remove the people who don't want to spend that much money

 

 

 

You're left with a pretty small group of potential buyers. With limited sales potential you have to either cut costs, maximize ATPs (or both), or you find other products where your potential market is more favorable.

 

Look at the folks who are willing to consider a Cadillac (or Lincoln) and build the vehicles they want to buy and figure out how to do it profitably.

 

Cadillac and Lincoln have a large built-in customer base from their volume brands. A lot of Ford/Chevy/Buick buyers want to be able to upgrade to a slightly nicer vehicle with more perks and features. They don't necessarily want a BMW with a different badge on it.

 

That doesn't mean you can't do those types of vehicles but it means you can't ONLY do those types of vehicles or that you do them first.

[rmc523]

 

I would love to see some RWD Buicks and Chevrolets to help scales of economy but there's the problem,

do anything more with Alpha/Omega and you risk destroying the exclusivity of ATS, CTS and CT6.

The problem for me is how would GM do that and not undermine the elevation of Cadillac

and its premium pricing policy.

 

Ford is lucky because it only has the two brands these days and sharing derivatives is not

as difficult as it would be for GM across potentially up to three or four brands.

 

I wouldn't say Ford is lucky, I'd say they're smart.

[aneekr]

 

A lot of Ford/Chevy/Buick buyers want to be able to upgrade to a slightly nicer vehicle with more perks and features.

 

All three of those brands have made a concerted effort to offer more amenities with highline trim levels in recent years (e.g., Ford F-150 Platinum, Chevrolet Tahoe LTZ, Buick LaCrosse with Ultra Luxury Package). This approach is well suited to the type of customer you mentioned.

 

On the other hand, consumers seeking a bona fide luxury automotive brand such as Mercedes-Benz and Cadillac represent a different target market. A "slightly nicer vehicle with more perks and features" isn't sufficient here.

Edited January 13, 2015 by aneekr

[akirby]

 

All three of those brands have made a concerted effort to offer more amenities with highline trim levels in recent years (e.g., Ford F-150 Platinum, Chevrolet Tahoe LTZ, Buick LaCrosse with Ultra Luxury Package). This approach is well suited to the type of customer you mentioned.

 

On the other hand, consumers seeking a bona fide luxury automotive brand such as Mercedes-Benz and Cadillac represent a different target market. A "slightly nicer vehicle with more perks and features" isn't sufficient here.

 

No there is room above Platinum Fords, Chevys and Buicks where you get an upgraded dealer experience, a longer warranty, free maintenance and some features, colors and materials that you don't get on the volume brands. The new MKX is a perfect example.

 

And what gives you the idea that Cadillac is a bona fide luxury brand? Because they made 2 RWD sedans? Where is the luxury dealer experience?

 

Your very narrow, biased and frankly snobbish opinion of what constitutes a luxury vehicle or brand is tiresome.

[Fgts]

I wonder if the real problem here is that the Germans are so far ahead that Cadillac, at this point, simply cannot catch up with them. Audi, BMW and Mercedes offer more models and pack ever-increasing amounts of technology into them. When Cadillac tries to go head-to-head with them - as it is with the ATS and CTS - it simply can't match their efforts across the board.

 

The billions that GM is preparing to spend may be both too much and not enough. It's too much for GM to bear, given the needs of critical models such as the Cruze, Malibu, full-size pickups and various crossovers. It's also not enough to really effectively take on Audi, BMW and Mercedes, who certainly aren't standing still.

I don't know if they really are going head to head either. GMs advantage is the "bread n butter" money is coming from trucks (think how many $70k Tahoes and even $50k Silverados are being sold) also i highly doubt the money is coming off of other projects unless it's proof of it. The Regal, Malibu and Lacrosse is all-new for 16'-17'.

 

Ze Germans have to make their money on luxury cars filled with iffy do-dad because of the heat from homeland competitors, Italians, Asians and serious efforts again from Americans. GM imo is putting Caddy in a "sweet spot" or in other words you can get a 65K CTS V-Sport a comparable E Benz may have more hp but you'll shell out $20k more, why shell 20k more for an extra 30 hp and a badge? .

[Fgts]

 

No there is room above Platinum Fords, Chevys and Buicks where you get an upgraded dealer experience, a longer warranty, free maintenance and some features, colors and materials that you don't get on the volume brands. The new MKX is a perfect example.

 

And what gives you the idea that Cadillac is a bona fide luxury brand? Because they made 2 RWD sedans? Where is the luxury dealer experience?

 

Your very narrow, biased and frankly snobbish opinion of what constitutes a luxury vehicle or brand is tiresome.

The problem is those people don't want a Chevy, Ford of the such and don't care what features the mainstreamer have. Cadillac, Lincoln, Infiniti and the rest should shut-down with that type of thinking .

[aneekr]

 

And what gives you the idea that Cadillac is a bona fide luxury brand? Because they made 2 RWD sedans? Where is the luxury dealer experience?

 

Your very narrow, biased and frankly snobbish opinion of what constitutes a luxury vehicle or brand is tiresome.

 

The topic of this thread and the Bloomberg article Intrepidatious linked in post #1 should answer your question. Granted, Cadillac presently doesn't have the stature among luxury automotive brands that the big three (Mercedes-Benz, BMW, and Audi) do, but it's clear that Johan de Nysschen and his colleagues understand what it takes to play in this arena. And yes, the ATS and CTS in Cadillac's current vehicle lineup are good starting points for elevating the brand.

 

I acknowledge that Ford's decision to exit the luxury automobile market (other than retaining an 8% ownership stake in Aston Martin) worked reasonably well for the company. But that doesn't invalidate the strategies other automakers are pursuing in order to compete in that market, including General Motors.

[akirby]

The problem is those people don't want a Chevy, Ford of the such and don't care what features the mainstreamer have. Cadillac, Lincoln, Infiniti and the rest should shut-down with that type of thinking .

 

I have no idea what you're trying to say. Try again in English.

[akirby]

 

The topic of this thread and the Bloomberg article Intrepidatious linked in post #1 should answer your question. Granted, Cadillac presently doesn't have the stature among luxury automotive brands that the big three (Mercedes-Benz, BMW, and Audi) do, but it's clear that Johan de Nysschen and his colleagues understand what it takes to play in this arena. And yes, the ATS and CTS in Cadillac's current vehicle lineup are good starting points for elevating the brand.

 

I acknowledge that Ford's decision to exit the luxury automobile market (other than retaining an 8% ownership stake in Aston Martin) worked reasonably well for the company. But that doesn't invalidate the strategies other automakers are pursuing in order to compete in that market, including General Motors.

 

You can't just elevate Cadillac by building expensive vehicles. By "play in this arena" I take it you're talking about an engineering contest with super expensive bespoke products where the best product wins. Unfortunately selling vehicles isn't quite that simple, especially uber expensive ones.

 

Who do you think is going to pay MB prices for a Cadillac when the service department is still stuck in the 80s? The Prestige buyers won't give them a second look no matter how good the product is.

 

Caddy trying to sell $100K uber-sedans is like Timex trying to sell a $5K watch. Not gonna happen.

 

If you want to play with Lexus, MB, BMW and Audi you need good products and all the other things that luxury buyers want to go with them. And you need to know what you can sell and what you can't possibly sell.

[RichardJensen]

In short, you have to build luxury from the ground up. You can't build a thirty story elevator stack and then start leasing office space on the 30th floor.

[Fgts]

 

I have no idea what you're trying to say. Try again in English.

Translation; stop being a fanboy.

[akirby]

Translation; stop being a fanboy.

 

Translation: I have no idea what I'm talking about and I can't make a logical argument.

[akirby]

Tell me why Lexus best sellers are the ES and RX. It's not because they're RWD.

[Fgts]

 

Translation: I have no idea what I'm talking about and I can't make a logical argument.

So what the hell are you concerned about my augments about it?. Take your "logic" to a Mensa forum, brilliance . And Lexus sell because they're Toyotas and yet still offer more compelling products then Lincoln now (and yes that includes the 4 rwd cars they sell).

[akirby]

If they only sold because they are Toyotas then only Camrys and Highlanders would be selling. Lexus offers luxury styling, features and a luxury dealership experience that Lincoln and Cadillac can't match today, although Lincoln is in the process of getting there. Caddy will be several years behind even if they start today.

 

You can think that it's all about RWD autobahn blasters but you'd be dead wrong.