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Cadillac plans European car to fight German rivals

Reuters / August 21, 2003

DETROIT (Reuters) -- Cadillac, General Motors' luxury brand, is considering building a mid-sized car in Europe to compete in the heart of the market against its German competitors, a Cadillac official said.

The model would be smaller than the Cadillac CTS sedan, and about the same size as the BMW 3 series and the Mercedes C class, said John Howell, Cadillac's director of global brand development.

"We need to be competitive with the lower end of our main competitors, but we don't want to go down into the compact and subcompact classes," Howell told Reuters. "We might be willing to do a vehicle, an entry-luxury vehicle."

Reuters spoke to Howell on Wednesday and last week.

The vehicle, part of Cadillac's renewed expansion into Europe, the world's largest market for luxury brand vehicles, could arrive in two to three years, Howell said.

One factor for building in Europe is a 10 percent duty on vehicles imported from the United States, Howell said. Cadillac also could take advantage of Europe's trade agreements to export to other countries, including back to the United States, he said.

Cadillac sells the American-made CTS and larger Seville sedans in Europe. But Europeans complained that the Seville, launched in 1998, was too large for the roads, and tuned for a soft ride on America's rough highways. GM stopped selling a right-hand-drive version of the Seville in Britain several years ago.

"The Seville was an American car designed for the American market," said Bruce Harrison, a consultant with the Automotive Group of automotive advisors Global Insight.

Through June, Cadillac sold just 107 Sevilles in Europe, Cadillac spokesman Kerry Christopher said.

The CTS, which went on sale last year, was partially engineered in Germany and has received positive reviews in Europe. But its sales through June totaled just 284 in Europe.

MORE DEALERSHIPS, CARS

Cadillac's limited lineup and low profile in Europe has also been a hurdle to sales. Cadillacs are grouped with mainstream Opel vehicles at select Opel dealerships across Europe. The Cadillacs are often forgotten at the back.

In late June, Cadillac appointed the Dutch car dealership group Kroymans Corp. B.V. to spearhead an effort to build 25 Cadillac Experience Centers in major cities across Europe. Cadillac expects the new, large dealerships will raise its recognition across the continent.

Cadillac will also expand the lineup with the SRX mid-sized SUV and the XLR roadster next year, followed by the next-generation Seville, to be called the STS, in late 2004 or early 2005. The Corvette sports car will also be included at the new Cadillac dealerships.

The strengthening euro had made importing some of those vehicles from the United States more attractive, Howell said. "We've definitely swung from a marginal business case situation to a very profitable business case."

Europeans have also complained that Cadillac's big V-8 engines guzzle too much gas. But the CTS and the SRX both have six-cylinder engines, and a four-cylinder could be in a future vehicle, Howell said. Cadillac will also add diesel engines, which are in more than 40 percent of new cars in Europe, in three to five years, he said.

With the additional vehicles, Cadillac sales are expected to grow to more than a few thousand a year, Howell said without giving specifics. "It's not the kind of thing where we're going to do a couple thousand, which has been our history," he said.

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