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Coronavirus could derail Cadillac’s plan for massive product rejuvenation

This time last year, General Motors’ luxury brand, Cadillac, had just finished moving its headquarters from New York back to Warren, Mich.

Cadillac’s leaders wanted to be closer to vehicle designers and engineers as it embarked on an expansive product launch. Cadillac promised to roll out a new vehicle every six months through 2021.

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The brand’s sales needed a shot in the arm and it had the product plan to do it. Cadillac’s global sales were building momentum and Cadillac boss Steve Carlisle talked about an all-electric lineup by 2030.

Cadillac ended 2019 with sales inching up by 1% to 156,246 vehicles sold, led largely by its new XT4 and XT6 SUVs.

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Things were on track. Then the coronavirus pandemic hit.

New-car sales across the industry have dipped amid the uncertainty the pandemic has brought to the market. Cadillac canceled plans for vehicle reveals and launches in April because of the rapidly spreading coronavirus.

Now its plan for a broader revival could be derailed.

“There is no question that the pandemic has put immense pressure on the industry and most future plans,” said Jeff Schuster, president of Americas Operations and Global Vehicle Forecasts at LMC Automotive. “That certainly includes the revival of Cadillac through product.”

No production, no sales

GM reported Wednesday that its total sales in the first quarter were down 7% compared to a year ago.

In Cadillac’s case its quarterly sales plunged 15.8% to 30,325 cars sold. One estimate said the loss this year in new vehicle sales across the industry could be as much as 3 million vehicles.

But don’t count Cadillac out yet, say some.

“It is too early to tell the impact this will have on Cadillac’s product programs. Cadillac does have a lot of momentum right now,” said Mike Albano, Cadillac spokesman, in mid-March. “While these are challenging times, we are a resilient company and we will quickly find our stride once this passes.”

Albano did not have an immediate comment after Wednesday’s sales results.

Still, every vehicle across Cadillac’s current lineup saw a double-digit sales plummet in the first quarter. The relatively new XT4 and XT5 SUVs’ sales were down 26.5% and 32%, respectively. The high-profit margin Escalade full-size SUV experienced a 17.6% sales decline.

As new vehicle sales stalled, so has vehicle production. Last month GM, Ford Motor Co. and Fiat Chrysler Automobiles agreed to the UAW’s request to shut down all North American assembly plants to safeguard workers from coronavirus.

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That alone will stymie Cadillac’s plans to launch a new vehicle every six months, some industry analysts said.

“It’s hard to launch products when your plants are down,” said Schuster, “That’s a long activity to bring a plant up on a program. If you can’t test and do pre-builds, you’re probably looking at delays on products.”

Once the plants do restart, he said, GM will prioritize the vehicles that drive revenue and margin the most, which are its Chevrolet and GMC pickups and SUVs.

Virus and long-term health

No production hurts every brand though, said David Whiston, Equity Strategist of U.S. Autos for Morningstar Research Services.

“Cadillac will delay its initiatives if it can’t make the new vehicles it has coming,” Whiston said “No one knows the damage extent yet though.”

But Whiston said if GM avoids distress, which he believes it will because it is cash rich and has taken measures to cut costs, Cadillac’s plans would be delayed, not canceled.

Last Tuesday, GM said it will draw $16 billion from its revolving credit facilities to stockpile cash. Two days later, GM said its 69,000 salaried workers must defer 20% of their cash compensation for six months. The company’s senior officers took pay deferrals and pay cuts, too.

“You can’t say for sure until there’s more certainty about when plants can reopen and social distancing is eased or stopped,” said Whiston. “I’m not worried about the virus hurting the long term health of the brand.”

Big plans on hold

In January 2019, Cadillac debuted the concept for an all-electric crossover that will be brought to market in 2022.

Cadillac revealed the next-generation 2021 Escalade in Los Angeles in February ahead of the Oscars. The brand had more reveals planned, such as the extended version of the redesigned 2021 Escalade as well as some futuristic EV concepts this month.

The extended Escalade would have been shown at the New York Auto Show this month, but the show was canceled due to the pandemic. The Jacob K. Javits Convention Center, the show’s home, is now being turned into a field hospital.

In early March, GM held an “EV day” for journalists at its Design Dome in Warren. It showed 11 future electric vehicles including the Cadillac Lyriq, a futuristic SUV.

Cadillac was planning to reveal the Lyriq to the world this month. That reveal was postponed last month as the coronavirus pandemic spread.

But Cadillac and GM’s mid-luxury brand, Buick, are both discontinuing certain models, which drags down sales. The thin inventory “made their numbers look worse,” said Michelle Krebs, director of Automotive Relations for AutoTrader Group.

Buick reported it ended the quarter with sales down 34.7%. Its LaCrosse sedans sales plummeted 95.2%. Its Regal sedan sales were down 64.7% and the Cascada convertible’s sales were down 99.1%. Buick is killing all three to have a lineup of only SUVs.

Cadillac is discontinuing its ATS and CTS sedans. The quarterly sales of those cars tumbled 91% and 93.4%, respectively.

Regardless of the sell down, Krebs said, “Super expensive luxury and performance vehicles are vulnerable as those are discretionary purchases that can be delayed or dropped.”

A changed world

This past fall, Cadillac launched the new 2020 CT5 sedan, replacing the CTS. It was priced below many of its competitors to help Cadillac capture market share.

Cadillac is scheduled to put the smaller 2020 CT4 sedan on sale this summer and it’s so far along that it is likely to stay the course, analysts say.

But Cadillac’s revival wasn’t just pinned on product. GM promoted marketing chief Deborah Wahl to the job of global chief marketing officer this past September.

Wahl was charged with “redefining Cadillac’s reputation and repositioning it for the future,” CEO Mary Barra said in a company memo at the time.

Analysts say that future repositioning will be on hold for now as all automakers are laser-focused on core business now.

“GM made its commitment … to relaunching the Cadillac brand, but the world has changed so much in the past month,” said Jessica Caldwell, chief analyst at Edmunds.Com. “The company is likely going to need to re-prioritize and pivot to the activities that will help them weather this storm.”

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©2020 Detroit Free Press

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