If he can pull it off, it would be the Cadillac of turnarounds. The epitome of luxury to the Greatest Generation, the boulevard cruisers have aged badly. Cadillac turned off an entire generation of car buyers over the past 20 years by cranking out stodgy models with poor reliability. Cadillac reigned as America’s top-selling luxury car for a remarkable 48 years–from 1950 to 1998. But while the luxury-car market soared in the booming ’90s, Cadillac was stuck in reverse. This year it sank to sixth place, behind the Lexus, BMW and Mercedes models embraced by affluent buyers. Cadillac’s sales last year were just half its 1978 peak and have fallen 25 percent so far this year. Worst yet, the average age of its buyers reached 62–the highest among leading luxury-car brands. Cadillac’s loyal following among the Geritol set has managed to keep the brand in the black, for now: analysts estimate Cadillac made $700 million last year. But if the company doesn’t quickly connect with younger drivers, those profits will go the way of tail fins. “It’s not a special thing to have a Cadillac anymore,” says Philadelphia salesman Rob Lanham, 38, who just bought a BMW 528. “You don’t look successful in Cadillac cars.”
Now GM is betting $4 billion on a make-it-or-break-it overhaul. The entire Cadillac lineup is being redesigned with an angular look that evokes a stealth fighter, or, some say, the Batmobile. GM is building a new $560 million Cadillac factory in Lansing, Mich.–its first new car plant in 15 years. And this summer it will take the wraps off its sharp-edged CTS model, a $30,000 small Caddy sedan with severe vertical headlights that GM hopes will lure the buyers who now drive the Mercedes C-class and BMW 3-series. Also rolling into showrooms over the next two years: two new SUVs, a $65,000 roadster and a $50,000 Cadillac pickup truck–that’s right, a pickup truck. That hulking truck, the EXT, has had a starring role as the bad guy’s wheels in next year’s “Matrix” sequel.
Cadillac’s revival plan took shape three years ago, behind three sets of locked doors in its soaring design studio in suburban Detroit. There, under a cloak of secrecy, a dozen of GM’s best young designers sketched out the daring new look in a three-week frenzy. The new design looks computer generated, with sharp creases along the fenders and Cadillac’s old egg-crate grill angled down in a scowl. Cadillac’s ads also are being made over, focusing on the avant-garde styling and high-tech features. But for that pitch to work, Cadillac must improve its quality. That’s why GM is building the superefficient factory and spending $3 billion engineering an advanced new chassis for Cadillac’s cars. “This is high-stakes poker,” says Cadillac chief engineer Jim Taylor. “But we have no choice.”
Cadillac’s comeback plan hit a pothole last month, when its top executive, Michael O’Malley, quit to join Ford Motor Co.’s ad agency, J. Walter Thompson. GM quickly replaced him by recruiting the head of Ford’s Volvo luxury-car line, but the defection didn’t look good. Wall Street began speculating that Cadillac might suffer the fate of Oldsmobile, which GM is killing because it could not attract younger buyers. “Cadillac is in a very similar situation to Oldsmobile,” says Lehman Brothers auto analyst Nick Lobaccaro. “If O’Malley had 100 percent confidence this turnaround plan would be great, he wouldn’t have left.” O’Malley says he still believes in Cadillac’s strategy, but admits it will be “incredibly difficult” to pull off. “If the quality isn’t perfect and the execution isn’t what it needs to be to compete with the world’s best, they’ll have a difficult time.”
How did Cadillac veer so badly off course? It began its long descent after the twin oil shocks of the 1970s turned Americans against gas-guzzling land yachts. GM executives, fearing that gas prices would quadruple, ordered a disastrous downsizing campaign for Caddy, which resulted in models like the 1981 Cimarron, a tiny Chevy dressed up with a little chrome and leather. Quality also hit the skids, as engines broke down and a $55,000 roadster sprung leaks in its roof. “We made some real bad product decisions,” admits John Smith, who ran Cadillac from 1997 to 2000. “And we let our guard down on quality.” In the ’90s, as GM suffered through a financial crisis that nearly bankrupted the company, Cadillac suffered from a lack of cash and direction. Cadillac failed again in 1996 to attract Yuppies with its Catera, a thinly disguised version of the bland Opel sedan GM sold in Europe. Even Ford’s Lincoln, a perennial also-ran to its crosstown rival, out-maneuvered Cadillac with the success of its Navigator luxury SUV in 1997. Cadillac had to play catch-up by slapping its wreath-and-crest logo on a gussied-up GMC SUV. Only now is Cadillac coming with its own edgy-looking 2002 model Escalade SUV. “Cadillac keeps joining the party long after it has peaked,” says Jerry Hirshberg, Nissan’s recently retired U.S. chief designer. “Doing a me-too SUV just calls attention to the fact they’ve lost their way.”
By driving off in bold new directions, however, Cadillac risks alienating its loyal buyers. The commodious DeVille is still a hit with the older crowd, which made it America’s top-selling luxury car last year. “To me, the Cadillac is the car of your dreams,” raves Al Fiorini, 78, who has been buying big Caddies for three decades. “I don’t think they should ever change Cadillac’s nice, comfortable ride.” Some Cadillac dealers fret that the aggressive new look will scare away their conservative customers. “My bread and butter are these older people, and if you go radical, they’ll be turned off,” says suburban Detroit Cadillac dealer Bob McInerney. “If these new models bomb, I’m dead.”
So will Cadillac follow Oldsmobile into retirement? Zarrella insists there is no comparison. Oldsmobile was a money-losing brand that tried to cover up its geezer image by removing its name from its new models. “If there’s something we learned from Oldsmobile,” Zarrella says, “it’s that you can’t hide from your brand. And we certainly won’t hide from the Cadillac brand; it’s too strong.” Within five to 10 years, Zarrella contends, GM’s big bet will pay off and Cadillac will once again define luxury. Failure, he says, will not be offered as an option on Cadillac.
