Competitive Luxury -- Can Cadillac Still Drive GM Profits?

Cadillac Motor Car Division officials concede they're unlikely ever again to see sales volumes like those of the late 1970s - or even the mid-80s.

But the division isn't giving ground in one area - its reputation as the prestige and profit flagship of General Motors Corp.

And Cadillac expects to remain No. 1 in North American luxury sales, despite ever-increasing domestic and foreign competition, adds general manager John Grettenberger.

"Our objective is, obviously, not only to be the flagship product but to generate a superior return," Grettenberger said last week as the division presented its 1993 models, including restyled rear-drive Fleetwood and Brougham sedans.

"Just like every other business these days, we're looking at every opportunity we can to get more efficient, produce more for a little less and reduce our capital requirements," he said. "We're doing that, others are doing that, and we expect that we will continue to be a good partner for General Motors."

That's music to the ears of harried GM corporate officials, who traditionally have relied heavily on Cadillac's enormous earning power. With profits per car of $5,000 or more, Cadillac's contribution to the company's bottom line has always outweighed its sales numbers.

But those sales are under pressure as never before. Since 1986, Japanese automakers have crowded into the U.S. luxury car field. Stung badly, European rivals are fighting back with a string of

successful and high-value products.

Domestic competitors are equally aggressive, with Lincoln fielding a new luxury coupe this fall and Chrysler adding a series of prestige vehicles beginning late next year.

At the same time, industry experts are beginning to doubt their earlier, rosy predictions of strong growth in the American appetite for high-priced cars.

It was commonly thought that total luxury car sales would grow to 1.5 million by 1995, compared with an expected 1.25 million this year. But the recession, and prospects for slower economic growth in the future, have forced many forecasters to scale their 1995 estimate back to 1.3 million.

In that environment, Cadillac would do well to maintain its market share and sales volume - and that appears to be its plan.

Asked if Cadillac ever again expects to reach its 1978 sales peak of 350,813 cars in the United States, or even its 1984 mark of 320,017, Grettenberger replied, "I don't think we could do 300,000 again unless we dramatically changed our product offering and offered another series of vehicles."

"I'd be very happy to maintain our leadership," he said. "I would like to stay in that 220,000-250,000 range. I think we can do a good job for General Motors at those ranges, and I think we can maintain our leadership."

Unlike most of its sister divisions in GM, Cadillac has its own independent engineering and manufacturing operations. That greater freedom to stamp its cars with a unique personality is paying dividends, Grettenberger said.

"I think we've proven that we can research, concept, define, engineer and build cars that are successful," he said. "Eldorado and Seville were totally done by us." Those luxury-sporty sedans and coupes sold comparatively well after their debut last year, and will be enhanced this fall with the addition of Cadillac's powerful North Star V-8 engine.

An even stiffer challenge for the division comes next year. Its bread-and-butter cars - the De Ville and Sixty Special sedans - will be completely redesigned for 1994.

With the current De Ville in its final year, Cadillac doesn't anticipate substantial sales gains in 1993. U.S. sales should just about equal the 232,000 anticipated this year, Grettenberger said.

But Cadillac should do better abroad, with export sales jumping to around 10,000 from about 6,000 anticipated this year.

In sum, Cadillac is trying to perform on a limited scale the same trick as GM's overall North American operations - adjust products to current market demand and world-class levels of quality, learn to make a healthy profit at lower volumes, and then fight for more market share.

"We know that Cadillac must earn credibility among a new group of younger buyers, and 1992 represents the first step of a long journey," said Cadillac advertising director Mike O'Malley. "But at the same time, the journey has definitely begun."