Start spreading the news, Cadillac’s moving to New York

September 23, 2014, 5:44 PM UTC
Chrysler And GM To Announce Closure Of Hundreds Of Dealerships
LINCOLNWOOD, IL - MAY 13: A Cadillac emblem decorates the grill of an Escalade offered for sale at Grossinger's GM dealership May 13, 2009 in Lincolnwood, Illinois. In an attempt to shore up the industry General Motors announced plans to cut 2600 dealerships while Chrysler has made plans to eliminate about 850. (Photo by Scott Olson/Getty Images)
Photograph by Scott Olson — Getty Images

General Motors’ (GM) Cadillac brand is setting up a headquarters office in New York in order to be closer to other premium jewelry, design and high fashion businesses and the consumers who buy their brands.

The relocation is the first major initiative to shake up and energize Cadillac’s sluggish business by Johan de Nysschen, who took over as the brand’s boss in August, following stints at premium automotive brands Infiniti and, before that, Audi. Henceforth, Cadillac will be operated as a separate business unit of GM.

David Caldwell, Cadillac spokesman, confirmed that Cadillac is “working on” securing space in Soho, a stylish neighborhood in lower Manhattan. The headquarters will open with “dozens” of personnel and could grow to a hundred or so, he said.

The move to New York by De Nysschen and many of Cadillac’s top sales, marketing and managerial executives, Caldwell said, is meant to distinguish the brand and afford it a separate identity that conveys a premium message, rather than simply a name that denotes GM’s luxury brand. Thousands of GM engineers, designers and factory personnel who work on Cadillac will remain in the Detroit area. GM’s corporate headquarters is located in downtown Detroit.

In all likelihood, De Nysschen will have to train his colleagues to exclude the words “GM,” “Buick,” “GMC,” and “Chevrolet” from their vocabulary and consciousness, especially when talking to customers, dealers, advertisers and media. Many consumers who shop for Lexus automobiles don’t realize that the brand belongs to Toyota; likewise, Audi owners may be only dimly aware that it’s a Volkswagen brand. That’s because automakers go to great lengths to keep premium brands distinct and separate from mainstream counterparts, lest a Lexus become known as an expensive Toyota–and perhaps not worth the higher price.

Cadillac’s new leader must find ways to grow Cadillac into a worldwide luxury brand, like Mercedes-Benz, BMW and others, which has been a long-stated goal of GM that’s never gotten off the ground. Presumably, a presence in a global capital like New York will give Cadillac executives a clearer understanding of how to create and market vehicles that will sell in Munich and Tokyo, as well as in Dallas.

While Cadillac has earned strong reviews for the performance of its models, particularly the ATS and CTS sedans, as well as the new Escalade large sport utility vehicle, the division’s sales have badly underperformed the U.S. luxury automotive market. Cadillac’s sales are down nearly 5% this year.

Cadillac’s difficulties, according to its dealers, stem in part from rapid turnover of the division’s top management since GM’s 2009 bankruptcy and reorganization by the U.S. government. For a time Cadillac was supervised by a former telecommunications executive who had no automotive experience. In addition to bringing managerial stability, De Nysschen is expected to push development of several new models and aggressive spending to make the brand more credible.

A big question is whether De Nysschen will be able to overcome entrenched resistance inside GM to prying Cadillac away from the rest of the company, at least in the eyes of consumers. Mary Barra, GM chief executive, has her hands full in the wake of the ignition-switch defect crisis, as she forces executives and managers to be more accountable. The strategic rethinking for the luxury car business suggested by a move to New York will further upset the status quo, accelerating—or, perhaps, impeding—the corporate rebirth that Barra is attempting to foster.