General Motors’ 112-year-old luxury car division, founded in Detroit and named for the city’s founder, is moving its headquarters to New York.
Cadillac, which has been steadily losing sales to its German rivals, wants to get closer to its ideal buyers. Executives and marketing staffers will set up shop in a loft office in Manhattan’s trendy SoHo neighborhood starting next year.
“There is no city in the world where the inhabitants are more immersed in a premium lifestyle than in New York,” Johann de Nysschen, the brand’s new president, said in a statement issued announcing the move. “It allows our team to share experiences with premium-brand consumers and develop attitudes in common with our audience.”
Cadillac will become a separate business unit, giving it more freedom to chase global growth. Most product engineering and design will remain in Detroit. Cadillac models will continue to be built at plants in Michigan, Texas, Canada, Mexico and China.
The company is still evaluating which employees go to New York, but spokesman David Caldwell said it’s likely fewer than 100 people will move in the first phase next year.
Allen Adamson, managing director of branding firm Landor Associates in New York, said the advantage of New York is its proximity to the luxury market.
“You have to catch trends closer to potential buyers,” Adamson said. “There are more hedge fund billionaires in NYC than there are in Detroit. The team will be closer to the luxury market and luxury users.”
Adamson said it’s also less important today for car brands to be linked to manufacturing centers like Detroit. Fiat Chrysler’s new global headquarters will be in London, for example.
“Cars today are less about the functionality of wheels and transmission and more about total experience: music, computer integration, the experience driving it. I don’t think the expertise is necessarily tied to a particular geography,” he said.
Right now, New York is Cadillac’s fourth-best U.S. market, behind Texas, Florida and Michigan. That could change, although analysts say most consumers won’t know where the brand is headquartered.
Corporate moves are something of a specialty for de Nysschen, who became Cadillac’s chief in August. He was head of Audi’s U.S. division when it moved its U.S. headquarters from suburban Detroit to Virginia in 2007. In 2012, he took over Nissan’s luxury Infiniti brand, which had just moved its headquarters from Japan to Hong Kong. Infiniti struggled immediately after the move, but new products helped its sales jump 30 percent in the first half of this year.
Cadillac sales are up 10 percent worldwide through August. Sales are up 70 percent in China, where the newly revamped CTS sedan just went on sale.
In the U.S., Cadillac isn’t performing as well. Sales have slumped nearly 5 percent this year despite well-reviewed new vehicles like the ATS coupe and XTS sedan.
U.S. luxury car sales have grown at more than double the pace of non-luxury car sales so far this year. Cadillac is missing out on those buyers. Audi sales are up nearly 15 percent, BMW is up almost 12 percent and Mercedes-Benz is up 9 percent, according to Autodata Corp. Toyota’s Lexus luxury brand posted a 16 percent increase through August.
GM’s product development chief, Mark Reuss, said that Cadillac’s sales have been disappointing. Reuss said Cadillac is making good products but needs better support from marketing. The move to New York should help that, he said.
“We need to get some fresh thinking into that brand,” he said.
Eric Ibara, a senior analyst at Kelley Blue Book, said Cadillac has discovered that making competitive products isn’t enough. He thinks the move will help Cadillac rebrand itself in a way that better suits the sleek vehicles now in its showrooms.
Cadillac isn’t the first Detroit brand to leave the Motor City. Ford’s luxury Lincoln brand moved its ad agency, Hudson Rouge, to New York in 2011. Lincoln hopes to score big with a new SUV, the MKC, and new ads starring Oscar-winning actor Matthew McConnaughey, but the brand has struggled to remake itself after a long decline.
Ford also tried to breathe new life into its luxury brands in 2000 by moving the North American headquarters of Jaguar, Aston Martin, Land Rover and Volvo to California. The company ran into money trouble and eventually sold those brands. It maintains a small design studio in Irvine.