Looking Into the Mind Of Cadillac's President

A diesel is sorely needed, but still 5 years away?  He has some lofty ambitions, but Cadillac isn't going to have a 911 fighter or a $250,000 car or any of these niche cars.  The money just isn't there.  I read the other day that Cadillac is spending $2.5 billion to expand their model line, Audi in spending $30 billion over 5 years on new models.  Cadillac will have a hard enough time just keeping the ATS/CTS current, let alone spending big money on low volume niche cars. 

Part of his job is PR, he has to talk about the bright future to keep investors buying stock in GM.  All this same stuff was said back in 2003 when the CTS came out, how they'd have a new crossover SRX, a new rear drive STS to battle the 5-series and E-class, a new converitible to battle the Mercedes SL, and 5 years later GM was bankrupt and half those models were scrapped.  We have heard all this optimism before without results.  I don't think Johan will have any better result than those that came before him.

Actually, it really makes me wonder where all the money is going at Audi since practically everything is built on the MLB platform with a few MQB VW Broughams at the lower end.  Of note, their only real sales gains are when they rebadge VWs. 

Audi is the king of "same sausage, different lengths"... so what are they blowing all this money on?  The interiors aren't that far above and beyond equivalent Cadillacs and they fall apart.

Audi is supposed to expand to 60 models, but A4, S4, RS4 is 3 models by how they count.  They spend a lot on body styles.  Perhaps money will go into new engines because that 2.0T and supercharged V6 have been around forever.   Maybe they will role out a new version of MMI and a self driving system for the A8, there was rumor of a new rear drive platform for the A8.  Electric drive could consume a lot of dollars, if they make that E-Tron sports car, or a fully electric sedan that could be a big R&D investment.

But not $30 billion worth...

Figure a billion per engine platform. No more than half a B on mimi. Electric drive will be in an existing platform, so just the cost of the power train, maybe maybe $1.5b.

I'm just not seeing $30 billion. It's one thing to *say* your going to spend $XX billion dollars.... Its another thing to do it. How much of this is just Audi trying to out boast Mercedes?

Look it another way, $30 billion is how many S Class development programs? Does it seem like a reasonable number for Audi to spend?

^ Agreed. It smacks of the fallacy that a mercedes headlight assembly actually costs $1300- it's not credible. Accounting/PR spin, IMO.

Add to that this eye-opener; if audi spends 15 times the R&D money yet barely eclipses Cadillac in sales (clearly; audi is on the same crushing volume track MB/BMW is), that's a terrible ROI for R&D dollars. And by that token; to get to MB levels they'd seemingly have to spend 200 billion!

I don't see significant marketshare upswing for audi in the foreseeable future, they're already in most lux/ entry crapbox segments, they have diesels, sports cars, performance variants, AWD….. where are they going to go?

He's just saying the current Opel diesels don't cut it when it comes to a luxury brand. No surprise there, really, but still better to offer them right away or to outsource someone's diesel than be left to rot in Europe again.

If I am spending $30B only to produce manatee faced FWD vehicles of different sizes, then please dear board of directors, fire me.

I have been reading about Audi's 11-figure R&D for past three years from SMK. Audi has yet to produce anything of significance from that figure. May be it is going to have a nuclear fusion propulsion system tomorrow.

A R&D of $1 with significant outcome is 1 billion times better than R&D of $1B with no outcome.

I don't know what Audi is spending it on either, most of their cars seem to have barely changed in the last 5 years. I am only saying that Audi stated they would spend $30 billion from 2014-2018. But remember Audi is the #1 selling luxury brand in the world, they sell like 400,000 cars a year in China.

This is where the problem for Cadillac is, they don't have the economies of scale or volume for GM to give them a massive R&D budget. So Cadillac gets limited to 3 sedans, a couple SUVs and maybe a coupe. It has been that way for 15 years. And they haven't expanded the line yet or got the money to do so.

My point is that you're comparing Cadillac's declared spend with Audi's clearly fictional declared spending plans. 

Cadillac get's their economies of scale from the rest of GM. The 3.6TT is a great engine and it gets much of its bones from other GM vehicles, but Cadillac has done a great job of making it special.  Cadillac has Magnetic ride control which it shares with Corvette and GMC Denalis.  Buick isn't even using MRC right now in their cars that have adjustable suspension, so it really has become predominantly a Cadillac exclusive.  Cadillac gets their economies of scale from the parts you cannot see, and engines, and transmissions.

That leaves Cadillac to worry about bodies, interiors, and chassis tuning. 

So Cadillac gets limited to 3 sedans, a couple SUVs and maybe a coupe. It has been that way for 15 years. And they haven't expanded the line yet or got the money to do so.

A3, A4, A6, A8

ATS, CTS, XTS, LTS

TT, A5, A7, R8

Absent, ATS Coupe, Absent/New CTS coupe is a virtual certainty, Absent

Q3, Q5, Q7

Absent/Buick Encore, SRX, Escalade, Escalade ESV

Not really seeing the giant holes you are. 

Audi has an A5 convertible, TT convertible, to which Cadillac has no convertible.   Cadillac isn't in the A3/Q3 segments, the XTS is a one and done product, the XT6 if it is priced in the 70s probably straddles the A7 and A8 in pricing.  It isn't yet clear what that car will be against.  There are a few product line gaps, more importantly Cadillac has a lack of diesels, and the ELR is their only hybrid/electric.  Cadillac takes too long to get things to market too, alternate body styles and V-series trims appear 2 years after the base sedan.  Again it goes back to lack of funding, Audi might lie about what they spend, but we know BMW and Mercedes are good for about $6-7 billion a year in R&D and Cadillac barely has the budget to keep a 5 vehicle lineup fresh, imagine if they tried to do it with a 10-12 vehicle line up.  And to give Cadillac more money that means you have to take it away from Buick and GMC, which would be fine with me, but GM won't do that.

And with BMW, where is the money going? There is no radial departure in styling, they've been selling the same 3-series (stylistically) since 1997.  They've been selling the same 7-series interior since about '91.   Talk about not keeping things fresh....  Mercedes was stuck in a very conservative styling rut there for a good 15 years and only recently has gotten some mojo back (I know some here don't like the new Benzes, but I do)

Cadillac doesn't need the kind of budget you are talking about.  It's not going to take $6b - $7b a year to build an ATS convertible and CTS convertible and a Q3 competitor.  It's not going to take another $1B to build a large mid-size crossover when all the bones already exist in other divisions or within Cadillac itself. It wouldn't even take more than $1B to build a small Z4/SLK like Cadillac roadster on Alpha platform especially with Camaro going on that platform.

Cadillac does not operate within a vacuum at GM, they get to pull on the resources of all of GM.

And I call   on the way Audi counts models. The A6, S6, A6 Avant, A6 Allroad, A5, S5, RS5, A5 Cabriolet, S5 Cabriolet, and RS5 Cabriolet are not 10 models. They are 1 model with various bodystyles and powertrains. 

BMW has spent a lot of money on carbon fiber, electric motors, batteries, etc for the i3 and i8.  If cars like that become the future of driving they might look like geniuses 10-15 years from now.  I think BMW wastes money on things like the 3-series Gran Turismo, 3-series Gran Coupe, X4 crossover coupe, etc.  They should put money into a 7-series based SUV to go into a new segment, rather than making 8 versions of the 3-series when the 3-series already dominates that segment.  Mercedes has a more complete and well thought out line up.

If Cadillac were to go the Mercedes route, they would need compact, small, medium and large size cars with sedan and coupe (8 models) compact, small, medium, large SUV (4 models), and mix in at least one sports car, and at least 2 of the 4 cars (like ATS/CTS) should have a convertible version.  That is 15 models, at least 10 need a V-series, so that is 25.  They would have to roll out 4 products ( a coupe or v-series version of an existing car would count) a year on 6 year cycles to keep the line up fresh.  It would be at least $2 billion a year,  probably $3.  They aren't rolling out products that fast now, I doubt they have the money to do so.

But remember Audi is the #1 selling luxury brand in the world, they sell like 400,000 cars a year in China.

This is where the problem for Cadillac is, they don't have the economies of scale or volume for GM to give them a massive R&D budget. So Cadillac gets limited to 3 sedans, a couple SUVs and maybe a coupe. It has been that way for 15 years. And they haven't expanded the line yet or got the money to do so.

You are okay to justify Audi to be tarted up VW so as long it is #1 in sales, but yet you have reservations for Cadillac to be sharing anything within GM. If you want Cadillac to chase volume then you should be ready for Cadillac FWD based on Cruze, Equinox, Trax, Impala. Because like it or not FWD sells in masses.

Cadillac should not be chasing Germans for sales crown. It should focus exclusivity. Let Buick handle the low rung BMW, MB and Audi. There is no need for a FWD Cadillac to compete the A3, 2 series (sedan) and CLA. Make Verano and Encore more potent, slap a GNX line and more features; that should do the trick. GM was already ahead in the FWD game with those two before the Germans jumped in, make them better.

GM can make excellent case of economy of scales by diversifying Cadillac platforms with Chevrolets and Buicks/Opels. Cadillac does not need its own platform unlike BMW or Mercedes does.

I don't like Audis personally, the lower end cars aren't luxurious, the 2.0 is a buzzy engine, they are unreliable and they have stiff suspensions because the don't have a rwd chassis, so they have to sacrifice ride quality for handling where as a BMW or Mercedes is pretty good at both.

I don't think Cadillac needs to copy Audi, I am just saying Audi sells a lot of cars and they have a lot of resources and money to work with because the Premier group is VW's profit center. Cadillac isn't seen as the cash cow of GM that gets whatever it wants.

they have stiff suspensions because the don't have a rwd chassis, so they have to sacrifice ride quality for handling where as a BMW or Mercedes is pretty good at both.

Da'f@#k? What the hell are you talking about?! RWD v. FWD has no bearing on ride quality... none at all. 

So why do Audi's ride hard compared to a Mercedes or BMW. Audi has to use a super stiff suspension for handling because they are front heavy and not as well balanced as a BMW. Rear wheel drive cars have a handling advantage over fwd, thus the suspension can be tuned somewhat for ride comfort and still handle better than a stiff suspension front driver. Mercedes and BMW make a superior car to Audi is all I am saying, they have better ride/handling balance.

It's not a FWD/RWD thing, it's Audi's choice in tuning.

And Airmatic Benzes are not fantastic handlers, though they are my favorite

I have two coworkers who have Audi's. A4 and A6. Both ride hard but they love it for that reason. As Drew stated, this is NOT a RWD versus FWD but the way Audi has tuned their suspension.

You have clearly not spent any time in BMW or MB FWD appliances as they ride hard and are anything but luxury rides. Cadillac DOES NOT need to compete in the FWD subcompact space. Buick has that covered just fine.

Buick does just fine with the Regal and Verano T handling and they're FWD. They also don't beat you up over the road... so what is Audi's excuse?

I have Airmatic, in Sport 2 it handles pretty well, very little body lean. But bumps are noticeable, especially on our garbage roads, so I almost never use Sport2.

but you've gotta turn up the sport mode to get it... which is my point. it's not a FWD/RWD thing, it is a suspension tuning decision by Audi.

I think Audi has always appealed to those uptight folks who want stuff 'just so'.....very conservative designs but for example interiors with really tight fits and gaps and interesting and nice material textures and finishes.  It's more about it being like contemporary art.  Attention to fine detail.  These folks would drop 100 bucks on a pair of jeans because of the stitching pattern and the name.  I dispute highly the notion that people buy Audi's for performance.  For awhile, when their AWD was exclusive, it was another differentiator.  Now its just an asset for them.

Cadillac's big problem in one aspect has been even though their interiors are nice, I don't think they have ever had the precision that one of those Audi bangers would find appealing.  Seats aren't taut enough, the padded surfaces are a bit fluffy.  the precision of which things are put together is not 100% there yet.  Plus Cadillac interiors still probably seem a bit overstyled for the Audi set although i think they are great in comparison to a lot of the BMW interiors.  Mercedes really has jumped back to the front of the pack on a lot of interior stuff.  I really do think interiors drives a lot of it.  A huge percentage of lux car makes is crossovers now.  I don't think performance drives luxury sales as much as some think, except maybe BMW.  I think though the performance has to be available to those few that want it.

one local dealer is advertising new CTS for about 16k off list...on their website....

DeNishen needs to get that he can push the price of caddies up all he wants.  there still is a major chore in finding the ceiling on what people will pay.

as for me, i would love to pounce on one of these ATS or CTS deals.

http://www.walserchevroletbuick.com/new-inventory/index.htm?search=&make=CADILLAC&model=ATS&model=CTS&model=XTS&saveFacetState=true&lastFacetInteracted=inventory-listing1-facet-anchor-model-5

The biggest turn off on the German interiors besides being dated like BMW is the floating NAV screen thing that MB has gone to. It looks out of place and just wrong. It actually looks like an after thought.

I still think a big problem was the CTS changed classes, it was the entry level Cadillac now it goes higher in price than the XTS. So you are trying to sell people a CTS at $55k that might have bought one for $35k 5 or 6 years ago. The new naming scheme I guess will erase that problem. And I agree that Johan can put the sticker price wherever he wants but finding people willing to pay it is the issue.

That isn't a problem. The CTS just took over for the STS and lost the coupe in the process (though I believe we'll see a new one). Just like it's not a problem that the Fusion took over for the Taurus.

It's far easier to move a model up in price classes with a product redesign/upgrade, than it is to move a model WAY down in price class, ALA the maybach. Those buyers, already smacked hard with massive depreciation, might be looking at a newer model selling for 100,000-200,000 LESS but with the same name!

That isn't a problem. The CTS just took over for the STS and lost the coupe in the process (though I believe we'll see a new one). Just like it's not a problem that the Fusion took over for the Taurus.

Which means they could have just called the car STS, and what is now the ATS should have been called CTS.

I still think a big problem was the CTS changed classes, it was the entry level Cadillac now it goes higher in price than the XTS. So you are trying to sell people a CTS at $55k that might have bought one for $35k 5 or 6 years ago. The new naming scheme I guess will erase that problem. And I agree that Johan can put the sticker price wherever he wants but finding people willing to pay it is the issue.

I agree that the new naming scheme will negate that thought process. I will also add AGAIN that the absence of the Coupe and an avail CTS-V for Gen3 would also affect sales. And while I kno U would never see the positive in the fact that even without those variants the CTS.. at a higher price.. has only fallen off 2.3% for the year and only went from 2643 (Nov 2013) to 2445 (Nov 2014) 

I submit again that it is IMPOSSIBLE for them sell as many vehicles as the competition if they don't have the same amount of cars as the competition. It doesn't even LOGICALLY make sense. 

Witness:

If I want a Convertible entry level luxo and Cadillac doesn't have one.. then I'm off to the BMW, Audi, Benz dealer to give them that sale. 

Cadillac 0

BMW, Audi, Benz  1

If I want a Convertible Mid level luxo and Cadillac doesn't have one.. then I'm off to the BMW, Audi, or Benz,  dealer to give them that sale

Cadillac 0

BMW, Audi, Benz   2

If I want a Larger level RWD luxo CUV and Cadillac doesn't have one.. then I'm off to the BMW, Audi, or Benz,  dealer to give them that sale

Cadillac 0

BMW, Audi, Benz   3

That's 3 sales I've lost as Cadillac simply for not having teh product the customer wanted. The effed up part is that this is car-centric. Its all businesses. If U went into a KFC and they weren't selling Drumsticks today... and U only ate Drumsticks.. but the Popeyes across the street was offering a 3 Piece Drumstick meal.. Where would U end up?

Cadillac needs to put a rush on coupe and convertible versions of the ATS and CTS for that very reason. Or on future models co-develop the coupe and sedan side by side and release both at the same time.

 

That isn't a problem. The CTS just took over for the STS and lost the coupe in the process (though I believe we'll see a new one). Just like it's not a problem that the Fusion took over for the Taurus.

Which means they could have just called the car STS, and what is now the ATS should have been called CTS.

 

It doesn't really matter since they're going to all get renamed anyway.   But then the Fusion should have been named Taurus too. 

At the rate BMWs are putting on weight, price, and size, the 3-series is going to need to be renamed 7-series in a generation or two.

So then the 7 series becomes the Boomer car for the retired?

It isn't already?

According to SMK all the cool kids drive em!

So then the 7 series becomes the Boomer car for the retired?

That and the LS460. I have yet to see a young person in an LS460 that was new. If U see one its a used vehicle

I don't think people under 60 even buy a used LS460.  Used ones are probably hard to come by, the LS460 is like the last car you buy before you die.  People buy them at age 70, drive it 15 years then go to the nursing home or grave.

The Fusion and Taurus both still do well in these parts, and the Taurus sells for much higher prices than it used to. And they sell for very high prices on the used market too. Lots of people love the heft of the latest Taurus. It even takes sales from e MKs. So for ford at least the fusion does bang up but there is still a healthy market for the lower volume higher profit taurus.

I'm part of the bunch that thinks the CTS may have needed to be STS. CTS name doesn't yet mesh with people's expectation on price.

GM is having a bit of a rough go on some of their prices lately. New regals seem to be fire sales on the lots vs msrp and I've already seen used 2014 regals with about 15k miles showing up on lots here at around 21k price. Including one with AWD for that price. Why can't GM bring the money? To me part of it is their car sizes are smaller than expected.

The Regal is a different kind of Buick, that's its problem. It doesn't sell to the Lexus ES crowd because it's got all this sportiness and handling all over the place. It doesn't sell to the younger crowd because it is a Buick. I will say though that most of the time the Regal drivers I observe are younger than you would expect, so the message is getting through to some.