<b>Cadillac CTS family could be 3-series fighters</b>

By DAVID SEDGWICK | AUTOMOTIVE NEWS

AutoWeek | Published 12/26/06, 7:56 am et

DETROIT -- The Cadillac CTS sedan may be about to start a family.

General Motors insiders say Cadillac is seriously considering a plan to create a family of CTS sedans, coupes and wagons that would emulate BMW's 3-series lineup.

Mock-ups of a wagon and coupe already lurk inside GM's design studio in suburban Detroit. Of course, that doesn't mean they'll ever go into production. But GM executives clearly have spotted an opportunity to create a CTS minibrand within Cadillac.

The sedan would remain the centerpiece of a CTS family, generating the bulk of total sales. And GM is prepared to brag about it. The redesigned sedan - which sports a new interior and a grille reminiscent of the Cadillac Sixteen concept - will debut during the Detroit auto show in January.

<b>Niche strategy</b>

With sales of 50,024 units through November, the CTS sedan has a secure market niche. Because the wagon and coupe would share mechanicals with the sedan, Cadillac can make money if those new models generate sales of 20,000 units apiece.

That's where Cadillac's European strategy could prove useful. Most Americans supposedly don't care for wagons - but Europeans do. If Cadillac can sell a couple of thousand CTS wagons in Europe, it would help reach the wagon's breakeven point.

If GM goes ahead with this strategy, expect the CTS family to be $30,000 to $40,000. That would target the fattest portion of the U.S. luxury market - a segment that generates annual sales of 1 million units.

Here's how the rest of Cadillac's lineup would fit the brand's strategy:

Stop dreaming about a production version of the Cadillac Sixteen. That concept car drew rave reviews, but a production version would cost a couple of hundred thousand dollars. The Mercedes Maybach and the Rolls-Royce Phantom have demonstrated just how small that segment is.

Forget about an uber sedan that could challenge the Mercedes S class. Volkswagen's Phaeton flop-aroo has demonstrated the risks of moving upscale too quickly.

Cadillac executives think they could pull it off. But product development is costly, and GM is trying to conserve resources. An S-class competitor simply isn't a priority.

In fact, Cadillac's flagship car is actually a truck: the Escalade. The Escalade still has room to move upscale with new powertrains and interiors. Stay tuned.

Cadillac needs only one $50,000 sedan, not two. We are told that Cadillac executives might dump either the STS or the DTS sedan. The $40,000-to-$50,000 price segment generates industry sales of 300,000 units.

In a segment of that size, Cadillac's old something-for-everyone strategy is obsolete. Customers don't walk into a Cadillac showroom asking for "traditional American luxury" or "European-style performance." Says one executive: "They just want a nice car."

But here's the problem: The front-wheel-drive DTS handily outsells the rear-wheel-drive STS. But traditional DTS buyers are dying off, and Cadillac wants to promote rwd performance.

What about the SRX and the XLR roadster? Cadillac needs a crossover, so the SRX has a future. The roadster seems expendable. But the XLR shares mechanicals with the Corvette, so it is not hugely expensive. I'll leave it to the buff magazines to track the roadster's future.

The bottom line: GM executives are convinced that Cadillac can attract younger buyers, that the CTS lineup can expand and that the brand can afford to get sassier.

At this point, I wouldn't be surprised if tail fins reappear someday.