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March 6, 2003

COMMENT: Cadillac: slow return to Europe

The planned re-launch of Cadillac in Europe is being delayed until later this year, as it has still failed to reach a conclusive agreement with third party distributors. The eventual move into Europe could generate $US40 million in profits if the Euro remains strong against the dollar.

By bcusack

The planned re-launch of Cadillac in Europe is being delayed until later this year, as it has still failed to reach a conclusive agreement with third party distributors. The eventual move into Europe could generate $US40 million in profits if the Euro remains strong against the dollar.

GM is planning an ambitious expansion of its prestige Cadillac marque in Europe in an effort to take on BMW and Mercedes in their home markets.

However this expansion has hit delays because of unsuccessful talks over distributor agreements.

The change in market focus for the quintessentially American brand has come as a response to positive foreign trade conditions. A weak dollar in comparison to the Euro would enable extra potential profits of $4,000 per vehicle to be made on sales of Cadillac’s most recent model, its CTS saloon in Europe.

In addition, the move is perceived to be a direct response to BMW and Mercedes-Benz’s aggressive moves in the US, which have been stripping market share away from Cadillac in its home market.

However, by moving overseas, Cadillac is moving into a global luxury market which is already experiencing saturation. Established international players such as Rolls-Royce, Bentley and Mercedes are struggling to find markets for their latest ultra-luxury cars. With Cadillac’s intention to develop a luxury vehicle to compete with these players directly, the market will become even more crowded.

Yet Cadillac’s ambitions at the very top levels of the market are intended to do little more than boost the brand and raise the marque profile in its new international market space. Cadillac would only need to cover its costs for a top-end vehicle to make this strategy workable; it would not be relying upon the ultra-luxury models for its main profit streams.

At present, Cadillac has only a handful of dealers in Europe. The new move could potentially generate sales of up to 10,000 luxury vehicles a year, with profits standing at $40 million. Of course, this is providing that the strength of the Euro doesn’t crumble in the face of the dollar and that Cadillac can perform sufficiently well overseas to justify its presence in the new market.

SOURCE: DATAMONITOR COMMENTWIRE (c) 2003 Datamonitor. All rights reserved. Republication or redistribution, including by framing or similar means, is expressly prohibited without prior written consent. Datamonitor shall not be liable for errors or delays in the content, or for any actions taken in reliance thereon.

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