Why General Motors Stuck With High Cadillac Prices Despite Slow Sales

[Bruce Nunnally]

De Nysschen's long-term target is for Cadillac dealers to have just 30 days' worth of supply on hand. That's much lower than most dealers manage now, but he says moving to limit dealers' inventories will reduce incentives (increasing average transaction prices) and reduce the amount of "working capital" dealers have tied up at any given moment. Both will help improve dealers' profit margins.

It sounds simple, and it makes a lot of sense. But the fact that Cadillac is able to take that approach is a sea change for General Motors. For decades, GM was focused on market share as the defining metric of success. De Nysschen has convinced his boss, GM president Dan Ammann, that accepting a near-term decline in U.S. sales for Cadillac is the right long-term move for the brand.

In his presentation at Barclays, de Nysschen recognized the need to convince Wall Street as well. "I ask you to leave me alone for the quarterly result," he told the audience of analysts. "If we work to optimize the quarterly results, we will continue to do precisely the wrong thing for Cadillac. We need to now invest in rebuilding this brand."

For individual GM investors, the message is clear: Cadillac's U.S. sales will be lower for a while. It's all part of the plan

Read more: http://www.fool.com/investing/general/2014/12/07/why-general-motors-stuck-with-high-cadillac-prices.aspx#ixzz3LEaGkS2W

[Cadillac Jim]

It's about time for recognition of the consequences of the fact that publicly-owned companies that are forced to a 90-day business horizon cannot execute a plan based on a vision. It's amazing that GM, still saddled by the terms of the bailout, has both the flexibility and the will to openly state this to the 90-day crowd, i.e. the market analysts. Their leverage is that stock price determines the cost of money for the publicly traded firm because equity (e.g., stock shares) is security for lines of credit that support day-to-day operations, and cost of money is a serious part of operating costs.

Any business with a 90-day business horizon cannot compete, in the long term, with similar businesses with two to five year business horizons, any more than a blind man can compete with sighted runners in a marathon. Most foreign firms that sell cars in the US are operated by management that is allowed vision-driven business plans, including some government-supported companies.

The Big 3 have their vision-related set-apart products. Chrysler, now a division of Fiat, has the Viper and some Dodge products. Ford has the Mustang and is starting to reinvent Lincoln, but its greatest innovation for 2015 is... a pickup truck that placed third in the Motor Trend Truck of the Year contest for 2015... with the huge Ford Transit van placing second. First was the all-new Chevrolet Colorado, Chevrolet's re-entry into the small truck field, a solid if conservative design and product.

GM has the Camaro, the Corvette, and most of the Cadillac division, but that's all there is, GM having eliminated Firebird and the best of Holden through Pontiac, and the world-class Oldsmobile engine development team.

With time, we will see what vision can bring us for the future. GM's success will likely encourage the others to open up their business horizon too. GM started the reliable, daily-driver supercar concept in 2004 with the STS-V and followed that with the CTS-V in 2005, setting up the world standard with the 2009 CTS-V. The ATS has broadened the offerings for its part of the market.