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Cadillac: An American Luxemobile Comes Roaring Back

Rick Newman
The Exchange

A decade ago, American-made luxury cars were an endangered species. But one nameplate has made an impressive recovery.

General Motors (GM) announced that its Cadillac division sold nearly 14,000 vehicles in the United States in May, a 40% increase from the same month in 2012. So far this year, Cadillac sales are up 38% -- the biggest annualized gain since 1976. Back then, the lineup included tanker-sized models such as the DeVille, Eldorado and Fleetwood Brougham, whose eventual extinction indicates how different Cadillac is today.

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GM has been trying to revive Cadillac for years, with the first breakthrough being the angular, stealth-fighter styling that debuted on the 2002 CTS sedan. GM’s 2009 bankruptcy filing slowed the evolution of the entire division, but other models, such as the new XTS large sedan, finally caught up with the brand’s modern blending of edgy sheet metal and cushy, recliner-like interiors.

The new ATS sports sedan, released in 2012, provided something else Cadillac desperately needed: A whiff of brash youthfulness. GM designed the ATS to meet or exceed the performance parameters of the BMW 3 series, considered by many auto enthusiasts to be the benchmark for five-passenger production cars. The ATS has fared well in the predictable showdowns staged by the automotive press, with Car and Driver declaring that “the ATS is unquestionably the more satisfying sports sedan of these two.”

As the starter Cadillac -- with a base price beginning at $33,095 -- the ATS ought to help bring younger buyers to a geriatric brand whose average owner is still 65, according to research firm Strategic Vision. The average age of a BMW owner, by contrast, is 48. The ATS has accounted for 23% of Caddy’s sales so far this year, with many of those buyers new to Cadillac, since the ATS wasn’t available during the same period last year.

Cadillac’s biggest seller is the SRX crossover (starting price: $37,330), which accounts for 29% of sales. The rest of the lineup includes the retooled XTS ($44,075), the redesigned CTS ($38,905) and the ginormous Escalade SUV ($63,745). The CUE touch-screen, available on most models, is another effort to bring buzz to the brand, since it mimics a tablet device such as the iPad and offers slick new mix of entertainment and technology features. However, it also carries some of the frustrations that come with new gizmology.

The luxury segment is one area where GM (which, as a sidebar, Standard & Poor's said Monday is heading back to the S&P 500) is trouncing its domestic rivals. Ford (F) is aggressively trying to revive its Lincoln division, but it's trailing GM and Cadillac. Chrysler has no luxury division per se, and most of the effort to turn it around since its own 2009 bankruptcy has gone into the Jeep brand and the Ram pickup.

An overall improvement in auto sales is helping nearly all automakers post yearly gains. Sales in May clocked in at a 15.3 million annualized pace, a modest improvement from the prior month and a sign that consumers remain willing to spend on costly items. Annual sales are still well below the peak levels of 2005, when automakers sold more than 17 million vehicles, but they’ve recovered nicely from 2009, when sales sank to 10.6 million, according to Ward’s Automotive.

Despite impressive sales gains, Cadillac still faces daunting competition from German and Japanese luxury makes. BMW and Mercedes-Benz have been duking it out for the sales lead among luxury brands, with Lexus a strong third. Cadillac’s performance this year has helped it pull ahead of Acura, into fourth place, but Caddy’s overall market share among luxury brands is still just 10%.

That’s an improvement over the dark days of GM’s bankruptcy, but below the 12% share Cadillac enjoyed in 2004, a recent peak. This is one race that requires longevity, as well as regular bursts of acceleration.

Rick Newman’s latest book is Rebounders: How Winners Pivot From Setback To Success. Follow him on Twitter: @rickjnewman.