Cadillac Distances From GM to Avoid Bankruptcy Stigma
March 9 -- Cadillac, the luxury brand General Motors Co. acquired in 1909, is distancing itself from the Detroit-based automaker to avoid the stigma of the parent company’s $50 billion U.S.-backed bankruptcy last year.
Cadillac is erasing the GM name from its marketing and dealerships, changing e-mail addresses to @cadillac.com from @gm.com and exiting companywide promotions such as the Red Tag Event,
said Nick Twork, a spokesman. The separation strategy was “absolutely” driven by GM’s restructuring, he said.
“Cadillac, which has really turned itself around with new levels of quality and exemplary products, doesn’t want to be associated with something that will drag it down,” said John Grace, president of marketing consultant BrandTaxi LLC in Stamford, Connecticut. “With GM’s bankruptcy comes lower credibility in the ability to build quality products.”
Bolstering Cadillac is central to Chief Executive Officer Ed Whitacre’s effort to revive GM, which is shedding half its U.S. brands as part of a post-Chapter 11 plan. Cadillacs such as the SRX sport wagon start at $33,330, a 47 percent premium over the Chevrolet Equinox, according to researcher Edmunds.com.
The recession and GM’s slide into bankruptcy helped cut Cadillac’s 2009 U.S. sales by 32 percent, compared with the drop of 30 percent for the biggest U.S. automaker. Cadillac’s 14 percent gain this year is the worst among GM’s 4 remaining brands and less than half of their combined 31 percent jump.
Disavowing the parent company reverses the approach the automaker took five years ago when it began affixing a silver GM badge on all its models. “Our own studies show that consumers place a tangible value on the General Motors name,” GM said at the time.
Now, company officials are telling dealers the separation strategy is aimed at avoiding the “negative connotations with GM because of the bankruptcy,” said David Butler, general manager of Suburban Cadillac in Ann Arbor and Troy, Michigan.
GM plans to boost Cadillac’s U.S. sales by 28 percent to 140,000 units this year, Butler said. Annual Cadillac deliveries last rose in 2005, climbing 0.3 percent to 235,002, according to researcher Autodata Corp of Woodcliff Lake, New Jersey.
“There is a lot of pressure on Cadillac this year because it took such a beating last year,” Butler said. “As Cadillac dealers, we didn’t like being lumped in with the other GM brands, especially when they threw us into the Red Tag sale. We felt it cheapened the brand.”
Instead of joining the annual year-end sale featuring discounted prices and cash rebates, Cadillac will run its own marketing campaigns that probably will include lease promotions more popular with luxury buyers, said Twork, the spokesman.
A new Cadillac ad campaign will debut later this month before a model introduction at the New York International Auto Show on March 31, Twork said. The ads will be the first from Bartle Bogle Hegarty, the New York agency hired in January to replace Modernista! of Boston, he said.
“We’re in the process of revamping all the things that face the customer,” Twork said. “The Cadillac brand is best communicated as Cadillac without GM.”
Founded in 1902 and bought by GM seven years later, Cadillac is the first unit trying to create distance from the parent company. Chevrolet, Buick and GMC are also starting to play down those ties, said Susan Docherty, GM’s marketing chief.
GM’s logo is being removed from the base of signs at dealerships selling other brands, Docherty said, and the automaker is poised to begin research on how customers perceive the company.
“Consumers, in their minds, can separate out the corporation versus the brands,” Docherty said in an interview. “They can separate ‘Hey, I can still fall in love with a CTS coupe, but I may not necessarily be happy with the fact that General Motors had to go through bankruptcy.’”
Cadillac held the U.S. luxury-sales title for six decades before being eclipsed by Ford Motor Co.’s Lincoln in 1998. Since then, GM has been retooling styling and quality to compete with imports such as Toyota Motor Corp.’s Lexus, now the leader in U.S. luxury sales. Cadillac finished 2009 as No. 4, with 109,092 vehicles compared with Lexus’s 215,975.
“Cadillac is critical to GM’s turnaround,” said Jeff Schuster, a J.D. Power analyst in Troy, Michigan. “Certainly from a profitability standpoint, it’s important. But if you can raise the image of Cadillac, that will also buttress the GM brand.”
Whitacre has been working to eliminate the taint of the “Government Motors” tag coined by critics of the federal bailout that gave taxpayers a 61 percent stake in the company.
GM’s 8.375 percent notes due in July 2033 fell 0.25 cent to 32.5 cents on the dollar in New York, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.
In December, he began repaying GM’s $6.7 billion in federal loans. On March 2, he reorganized the U.S. sales and marketing team for the second time in three months. Cadillac General Manager Bryan Nesbitt was sent back to GM’s design staff, where he worked until July. Three of the brand’s marketing executives also left the company, Twork said.
Butler, the Michigan Cadillac dealer, said Toyota set the standard for brand identity when it formed the Lexus luxury line in 1989, omitting any mention of the parent company in marketing or showrooms. GM, he said, should do the same thing.
“I don’t think people will forget that Cadillac is a GM product,” Butler said. “But it’s the right thing to do. Customers come to our stores to buy a Cadillac, not a GM.”
LINK: Cadillac Distances From GM to Avoid Bankruptcy Stigma (Update1) - Bloomberg.com