Return to Detroit Won’t Help Cadillac’s Prospects

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General Motors Co. (NYSE: GM) believes that Cadillac will be helped if it moves its headquarters to the Detroit area from New York City, where it has been for three years.

The theory for the first move was that if the GM luxury brand was in New York, management could have more connections to a large population of Cadillac drivers, and cars made by competitors. It would also be free of GM’s product development bureaucracy. The plan failed as Cadillac’s U.S. sales went nowhere. And there is little reason to believe that the new move will trigger anything different.

While in New York City, Cadillac management must have noticed one thing. New York’s streets are filled with luxury cars from BMW, Mercedes, Audi and Toyota’s Lexus division, as well as those made by other huge manufacturers, like Volkswagen’s Porsche. Those same streets are home to very few Cadillacs. People who own luxury cars on the two coasts gravitate to imports.

Cadillac sells a fraction of the cars and light trucks sold by German and Japanese companies that operate in the U.S. market. That has not changed. If anything, Cadillac has fallen further behind as these manufacturers introduce dozens of new models and the GM division does not. Cadillac does not have an army of vehicles that run from $35,000 entry models to several mid-priced luxury sedans, sport utility vehicles and crossovers. Cadillac does not have high-end super-luxury cars that cost well over $100,000.

Cadillac’s primary success in recent years is sales of its models in China, the world’s largest car market. Whether Cadillac is based in Detroit or New York will not affect that.

GM senior management saw that nothing improved at all when Cadillac was untethered from its parent. Maybe trying it another way will improve results, although there is scant reason to think so.

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