Ford Motor Company (NYSE:F) has created one of the most impressive turnarounds in business history and leads General Motors Company (NYSE:GM) in many ways. However, Ford trails its rival in one key area for future growth — having a successful luxury line. Lincoln has been forgotten in Ford Motor Company (NYSE:F)’s turnaround story, while Cadillac is on fire right now, much to the delight of GM’s management. Let’s look at how the ATS is helping driving success at Cadillac and how it changed the game for consumers and investors.
Welcome back, Cadillac
2013 Cadillac ATS. Photo Courtesy of General Motors Company (NYSE:GM).
“Cadillac is back.” said Bob Ferguson, vice president, Global Cadillac. “Our growth is product-driven, new luxury vehicles with dramatic design and performance drawing new customers to showrooms.” So far this year Cadillac has seen its largest sales increase since 1976 – nearly four decades.
“Think about that,” Kurt McNeil, General Motors Company (NYSE:GM)’s vice president of sales operations, said in a conference call earlier this month. “We’re talking about the days of disco, when Cadillac was strictly a U.S. brand back then, not one that’s directly challenging the German luxury brands and gearing up to triple its sales in China over the next couple of years.”
In addition to the surge in sales, roughly 70% of Cadillac ATS buyers are buying their very first Cadillac. That’s a huge percentage and represent incremental sales and market share stolen from competitors – a huge win for Cadillac and no small reason for this year’s Cadillac surge.
The 2013 Cadillac ATS offers a unique choice to most luxury cars, a 2.0L turbocharged engine with a manual transmission. For those looking for a sporty and luxurious ride, the ATS can be equipped to meet that expectation. Its engine lineup has a 2.5L four-cylinder as well as a 2.0L turbocharged four-cylinder while still offering a 3.6L V-6. The 2.5L engine puts out about 202 HP while the 2.0L turbo puts out an impressive 272 HP. As impressive as the 2.0L engine is, being one of the most power dense engines in the industry, the award winning 3.6L V-6 tops it with 321 HP — nearly as much HP as my 2010 Mustang GT.
Once consumers take the flashy ride for a spin, it’s evident the luxury sport sedan is as nimble and exhilarating as Cadillac claims. It’s assumed that this ride would be luxurious, but in addition to the horsepower, the interior technology gives consumers a superior feel. That’s backed up by Edmunds.com noting the ATS finally gives the U.S. a medal-worthy vehicle in the segment and consumers reviewing the ATS with an average of 4.5 out of 5 stars.
2013 Cadillac ATS. Photo Courtesy of General Motors Company (NYSE:GM)
While the above statements are my opinion, apparently critics agree as the ATS took home the 2013 Detroit Auto Shows “North American Car of the Year” award. It was no small feat either, as it was the first Cadillac to win over the 20 years the award has been presented. Moreover, J.D. Power & Associates named Cadillac second for customer satisfaction, trailing only Lexus in the luxury division. Below is a list of a handful of its interior tech features, according to General Motors Company (NYSE:GM)’s press release.
Bluetooth phone connectivity with voice recognition
USB, auxiliary and SD memory card ports
SiriusXM Satellite Radio with three-month trial subscription
Keyless access and keyless push-button start
Reconfigurable 5.7-inch instrument panel cluster display
Full-color reconfigurable head-up display
Leatherette or leather seating surfaces
7 speaker Bose sound system (standard model)
Investing takeaway
Luxury brands are important to the elite global automakers for a couple of reasons. Firstly, luxury vehicles bring in higher transaction prices and better margins per vehicle. This is especially true as more technology and premium options are available. For example the Cadillac ATS starts at about $33,000 but can quickly surpass $50,000 with options and that brings in a nice bottom line figure for GM.
Secondly, the automotive industry is extremely loyal between brands and models. You’re either a Ford truck guy or a Chevy guy – there’s no grey area. Naturally as consumers grow older and increase their purchasing power, the next step from a basic Chevrolet, Buick, Ford Motor Company (NYSE:F) would be to the luxury level of that same automaker. This is where Cadillac is reaping the rewards while Ford loyalists are leaving for competitor lots because the Lincoln luxury line isn’t up to par, yet.
Bottom line
By the end of the decade General Motors Company (NYSE:GM) expects global luxury volume to increase by nearly three million vehicles while the luxury share of the overall market continues to surge. Thanks to game changing vehicles like the Cadillac ATS, CTS, and XTS, GM is well positioned to drive in higher profits on its vehicles. It’s also positioned well for success in the world’s largest and fastest growing auto market – China. One thing is for sure, Cadillac is back.
The article Cadillac’s 2013 ATS Has Changed the Game originally appeared on Fool.com and is written by Daniel Miller.
Fool contributor Daniel Miller owns shares of Ford and General Motors. You can follow Daniel on Twitter. The Motley Fool recommends Ford and General Motors. The Motley Fool owns shares of Ford.
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