Former Audi exec plans to spend $12b reviving Cadillac

Johan de Nysschen was plenty skeptical when General Motors asked him to run Cadillac.

De Nysschen helped make Audi a real contender in the U.S. and had recently joined Nissan's Infiniti.

Why jump to Cadillac, a brand that actually sold fewer vehicles last year despite a boom in luxury automobiles?

De Nysschen spent hours on the phone with GM President Dan Ammann to make sure this was no vanity project.

The clincher: GM agreed to invest heavily in Cadillac, eventually budgeting $12 billion for the next five years, or more than a quarter of the sum being spent on new models company-wide.

Ammann & Co. also pledged to give de Nysschen enough time and people to get the job done as part of a plan to split Cadillac into a company that's now based in New York.

GM is counting on Cadillac to drive profits in the next decade.

Luxury cars make up just 10 per cent of the 100 million cars sold globally every year but haul in 50 per cent of the profits.

GM will be less able to rely on fat truck margins to keep it solidly in the black because tightening fuel economy standards in the U.S. could push up production costs.

Making Cadillac a serious competitor to German luxury brands will be a heavy lift, but de Nysschen says GM has little choice but to try.

"The company needs to capture its rightful share of the profits available in the global luxury market," he said.

The new CT6, Cadillac's flagship sedan, will be on display this week at the New York auto show, where luxury vehicles traditionally take centre stage.

The CT6 was under development long before de Nysschen showed up, but he has ambitious plans to fill out Cadillac's lineup to compete with other luxury brands.

Three of the five planned new models will be crossover SUVs, a fast-selling segment.

Image 1 of 40: People walk through the GMC area during the 2015 North American International Auto Show. Photo / AP

When the South Africa-born de Nysschen, 55, became Cadillac president in August, he was surprised to find he had few dedicated product planning, marketing or sales people.

Under GM's centralized system, many worked for all four of the company's brands.

De Nysschen sometimes waited till the afternoon to get a meeting because the product planning and marketing people were toiling for Chevrolet, Buick or GMC in the morning.

This doesn't happen at BMW, Audi and Mercedes, he said.

De Nysschen now has 40 people in New York working in product planning and development, advertising and marketing - plus a few dedicated engineers and designers.

He expects the staff to grow to 150 people by the end of the year.

For too long, de Nysschen said, Cadillac product planners have looked through GM eyes.

When he asked for engine options for a future model, he was shown charts comparing a four- cylinder motor to those made by Chevy rivals, not BMW or Audi. That's why he insisted on moving Cadillac out of Detroit.

"They were not looking through Cadillac eyes," he said.

Given Cadillac's recent history, de Nysschen's insistence on dedicated resources makes sense.

In 2000, GM poured $4.3 billion into the brand and got momentum with the hulking Escalade SUV and the first CTS sedan.

But soaring gasoline prices in 2005 and the financial crisis a few years later halted Cadillac's progress, and GM spent little on new cars.

The result: Cadillac sales tumbled 6.5 per cent in the U.S. last year, making it one of only three luxury brands to lose ground. Only the Escalade sold more vehicles.

Cadillac still appeals to older folks, with the average buyer clocking in 64, 15 years older than the average BMW owner, according to San Diego consulting firm Strategic Visions Inc.

The brand's problems are manifold, says Uwe Ellinghaus, a BMW vet who is now Cadillac's chief marketing officer.

The brand doesn't have the crossover SUVs that luxury buyers are snapping up these days.

And even though the CTS and ATS sedans have the sporty ride and handling to rival a BMW or Audi, many luxury buyers don't know it yet, he said.

Cadillac sells six models and competes against 11 from Audi and 13 from BMW.

Cadillac has just one crossover SUV.

By 2020, Cadillac will add three more SUVs along with the CT6 sedan and renew four other models in the line-up.

A bigger Cadillac that will be even larger than the CT6 is also in the works, de Nysschen said.

The CT6 will show the new direction, Ellinghaus said.

Where some BMW cars have gotten bigger and heavier - and in his view less nimble on the road - the CT6 will be the size of the 7 Series flagship and as light as a 5 Series.

Next, Cadillac plans to offer a version of the Chevy Volt's plug-in hybrid system in many of its cars, Ellinghaus said.

The brand already has the ELR, which uses the Volt's drive system, but there's much more to come, he said.

With the right product, Cadillac can come back, said Eric Noble, president of The CarLab, a consulting firm in Orange, California.

Boomers may have moved on, but younger buyers pay attention and the name still shows up in everything from Bruce Springsteen songs to hip-hop tunes, he said.

Cadillac is surprisingly relevant, it enjoys a cultural connection that few other brands have.

Cadillac chief marketing officer Uwe Ellinghaus

Ellinghaus has been tearing up the advertising to try to carve out some space for Cadillac as the antidote to every boring rich guy's BMW or Mercedes.

That means no more images of Wall Street guys stepping out of a high rise and into their Cadillac or cars cruising the Pacific Coast Highway.

The "Dare Greatly" campaign features people who try to be different, like Steve Wozniak, the Apple co-founder who dropped out of college to build the first personal computer, and fashion designer Jason Wu, the high-fashion designer who dressed dolls as a young boy.

The message: Don't be a cliché; buy a Cadillac instead of a BMW, Audi or Mercedes.

"Cadillac will benefit from German ubiquity," Ellinghaus said.

When he and de Nysschen arrived, Cadillac didn't even have a tag line to compete with BMW's "Ultimate Driving Machine" or Audi's "Uncompromising".

The ads used to tout accolades for the cars and just close with Cadillac's crest and script.

That's a first step on what de Nysschen says will be a very long journey.

As the German automakers try to be the largest in the world, they will take fewer risks and become more bland, he said.

That gives Cadillac an opportunity to be individualistic and appeal to younger luxury buyers.

And what about styling?

The edgy look, which GM dubbed Art & Science about 15 years ago, won't go away completely.

But there will be more curves in the cars.

Building a luxury brand takes time, de Nysschen acknowledged.

But he said buyers will see a big difference in five years and vowed that "Cadillac will be a powerhouse global luxury brand that will command the respect of its peers."