CORONAVIRUS

Coronavirus could derail Cadillac's rejuvenation plans

New-car sales had dropped industrywide

Cadillac reported first-quarter sales had dropped 15.8 percent, to 30,325 cars sold. Above, the 2019 Cadillac XT4 Sport.
Cadillac reported first-quarter sales had dropped 15.8 percent, to 30,325 cars sold. Above, the 2019 Cadillac XT4 Sport. (Cadillac/TNS)

This time last year, General Motors’ luxury brand, Cadillac, had just finished moving its headquarters from New York back to Warren, Mich.

Cadillac’s leaders wanted to be closer to vehicle designers and engineers as it embarked on an expansive product launch.

Cadillac promised to roll out a new vehicle every six months through 2021.

The brand’s sales needed a shot in the arm and it had the product plan to do it. Cadillac’s global sales were building momentum, and Cadillac boss Steve Carlisle talked about an all-electric lineup by 2030.

Cadillac ended 2019 with sales inching up by 1% to 156,246 vehicles sold, led largely by its new XT4 and XT6 SUVs.

Things were on track. Then the coronavirus pandemic hit.

New-car sales across the industry have dipped amid the uncertainty the pandemic has brought to the market. Cadillac canceled plans for vehicle reveals and launches in April because of the rapidly spreading coronavirus.

Now its plan for a broader revival could be derailed.

“There is no question that the pandemic has put immense pressure on the industry and most future plans,” said Jeff Schuster, president of Americas Operations and Global Vehicle Forecasts at LMC Automotive. “That certainly includes the revival of Cadillac through product.”

GM reported Wednesday its total sales in the first quarter were down 7 percent compared to a year ago.

ARTICLE CONTINUES BELOW ADVERTISEMENT

In Cadillac’s case, its quarterly sales plunged 15.8 percent, to 30,325 cars sold. One estimate said the loss this year in new vehicle sales across the industry could be as much as 3 million vehicles.

But don’t count Cadillac out yet, say some.

“It is too early to tell the impact this will have on Cadillac’s product programs. Cadillac does have a lot of momentum right now,” said Mike Albano, Cadillac spokesman, in mid-March. “While these are challenging times, we are a resilient company and we will quickly find our stride once this passes.”

Albano did not have an immediate comment after Wednesday’s sales results.

Still, every vehicle across Cadillac’s current lineup saw a double-digit sales plummet in the first quarter.

The relatively new XT4 and XT5 SUVs’ sales were down 26.5 percent and 32 percent, respectively. The high-profit margin Escalade full-size SUV saw a 17.6 percent sales decline.

As new vehicle sales stalled, so has vehicle production. Last month GM, Ford Motor and Fiat Chrysler Automobiles agreed to the United Auto Workers’ request to shut down all North American assembly plants to safeguard workers from coronavirus.

That alone will stymie Cadillac’s plans to launch a new vehicle every six months, some industry analysts said.

“It’s hard to launch products when your plants are down,” Schuster said. “That’s a long activity to bring a plant up on a program. If you can’t test and do pre-builds, you’re probably looking at delays on products.”

Once the plants do restart, he said, GM will prioritize the vehicles that drive revenue and margin the most, which are its Chevrolet and GMC pickups and SUVs.

ARTICLE CONTINUES BELOW ADVERTISEMENT

No production hurts every brand, though, said David Whiston, Equity Strategist of U.S. Autos for Morningstar Research Services.

“Cadillac will delay its initiatives if it can’t make the new vehicles it has coming,” Whiston said “No one knows the damage extent yet though.”

But Whiston said if GM avoids distress — which he believes it will because it is cash rich and has taken measures to cut costs — Cadillac’s plans would be delayed, not canceled.

This past Tuesday, GM said it will draw $16 billion from its revolving credit facilities to stockpile cash.

Two days later, GM said its 69,000 salaried workers must defer 20 percent of their cash compensation for six months. The company’s senior officers took pay deferrals and pay cuts, too.

“You can’t say for sure until there’s more certainty about when plants can reopen and social distancing is eased or stopped,” Whiston said. “I’m not worried about the virus hurting the long term health of the brand.”

Support our coverage

Our most important Coronavirus coverage is free to the public.

If you believe local news is essential, especially during this crisis, please donate. Your contribution will support news resources to cover the impact of the pandemic on our local communities.

All donations are tax-deductible.

Support our coverage

Our most important Coronavirus coverage is free to the public.

If you believe local news is essential, especially during this crisis, please donate. Your contribution will support news resources to cover the impact of the pandemic on our local communities.

All donations are tax-deductible.