Cadillac Takes on BMW Amid GM Rebound

General Motors Co. (GM), with renewed verve as the world’s biggest automaker, will be in the spotlight at the Detroit auto show next week taking on BMW and its popular 3-Series line with a new compact Cadillac.

The new model represents Chief Executive Officer Dan Akerson’s strategy for gaining ground in the compact-luxury segment. GM is trying to barge into the market for small, upscale cars, an important entryway for new customers that is dominated by German vehicles such as the 3-Series and the Mercedes-Benz C-Class.

“The gorilla in the room is the 3-Series,” Kurt McNeil, Cadillac’s vice president of sales, said this week in a telephone interview. The new car, planned for a Jan. 8 unveiling, will be called the ATS and go on sale in the third quarter. “It will be a key battle ground for us,” he added.

The introduction occurs on the eve of the media days at the North American International Auto Show. Organizers expect more than 5,000 journalists from more than 50 countries to attend two days of press conferences and almost 40 worldwide product unveilings, including the Mercedes SL roadster and Ford Fusion. Show organizers announced yesterday that they had signed a five- year contract to keep the show at Cobo Center in Detroit with an estimated economic impact to southern Michigan of $1.75 billion.

The auto show will take place against the backdrop of the improving U.S. auto industry. Sales rose by more than 10 percent for two years in a row, the first time since 1983 and 1984, and analysts estimate they will grow this year to the highest level since 2007. Domestic automakers GM, Ford Motor Co. (F) and Chrysler Group LLC all gained market share last year and all project a full-year profit.

Akerson’s Strategy

GM has already hinted at its ATS marketing approach with an online video that talks about how the new model was tested in Germany on the famed Nurburgring racetrack. Equipped with rear- wheel and all-wheel drive options, the ATS will be billed as a performance machine that can compete head-to-head with the 3- Series, a person familiar with GM’s plans said.

“We think we have the right product: nimble, quick, fun,” Cadillac’s McNeil said. “Those are all of the attributes of what that segment looks for.”

The ATS is part of Akerson’s plan to expand Cadillac’s lineup to better compete in the luxury market. GM is also planning to introduce a larger sedan this year called the XTS to go against the Bayerische Motoren Werke AG (BMW)’s BMW 7-Series and Daimler AG (DAI)’s Mercedes E-Class.

Cadillac’s Position

BMW and Mercedes, the top two luxury brands in the U.S. last year, outsold Toyota Motor Corp. (7203)’s Lexus for the first time in 11 years on an annual basis. U.S. sales of Lexus last year, hurt by reduced inventory following March’s earthquake and tsunami in Japan, fell 13 percent to 198,552.

U.S. sales of BMW, which finished ahead of Mercedes by 2,715 deliveries, rose 13 percent to 247,907.

Cadillac’s aging lineup ranked No. 4 in U.S. luxury vehicle sales. The brand rose 3.7 percent last year to 152,389 led by deliveries of the CTS and SRX sport-utility vehicle, according to researcher Autodata Corp.

GM, based in Detroit, added some spice to the CTS nameplate in August 2010 by introducing a two-door version, which improved sales. The success of the coupe may foreshadow similar plans for the smaller Cadillac, McNeil said.

“It re-energized CTS and Cadillac but it wasn’t at the expense of our sedan business,” he said. “It does give us a little peek at what we’re going to deal with with ATS.”

‘Important Vehicle’

The ATS is “certainly an important vehicle for them because that segment is ridiculously competitive,” said Rebecca Lindland, a Norwalk, Connecticut-based analyst with IHS Automotive. “For a lot of manufacturers, it sets the luxury tone for the brand because it’s the first place that a lot of consumers venture into.”

Not having a compact model “has left them out of the game,” she said of GM. “A lot of people feel the CTS is too big, expensive.” The CTS has a starting price of $35,915, according to Cadillac’s website.

Lindland said she saw a concept version of the ATS’s interior a few years ago at GM’s design studio.

“It was gorgeous,” she said. “I couldn’t resist petting part of the seat section.”

GM hasn’t yet set a price for the ATS. The 2012 four-door C-Class starts at $34,800, excluding destination charges. BMW’s 3-Series begins at $34,600, according to the company’s website.

BMW is planning to introduce a new version this year of the 3-Series, which saw U.S. sales decline 6.5 percent last year.

“That is the BMW,” Ludwig Willisch, chief executive officer of BMW of North America, said of the 3-Series during a November interview in Los Angeles. “It really is very important for us.”

Sales Projections

Mercedes in September introduced a refreshed version of the C-Class with an improved interior and a two-door version.

U.S. deliveries of the C-Class improved 18 percent last year to 69,314, according to Mercedes, and helped reduce BMW’s sales lead late in 2011.

IHS estimates that Cadillac will sell 15,000 of the ATS this year and 60,000 next year, including a coupe version that’s expected in 2013, Lindland said.

“That’s a pretty healthy number,” she said. “The challenge for them is continuing to be a brand perception issue.”

To contact the reporter on this story: Tim Higgins in Southfield, Michigan at thiggins21@bloomberg.net

To contact the editor responsible for this story: Jamie Butters at jbutters@bloomberg.net

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