Cadillac ready to take on China
Big growth is siren song leading GM to $1.3 billion dealBy
August Cole, CBS.MarketWatch.com
Last Update: 3:05 AM ET Nov. 15, 2003CHICAGO (CBS.MW) -- Who will rap about Cadillac in China?
The maker of the Escalade, a model lyrically lionized on the hip urban music scene, will need some sort of buzz to take on what could grow to be one of the biggest auto markets in the world.
China's frenzy for new cars has automakers from around the world feverishly gearing up to keep the pace with phenomenal growth while trying to figure out just what buyers there will want as incomes rise and car ownership becomes more common.
GM's latest push is a $1.3 billion one-two import and assembly deal that will send thousands of Buicks, Cadillacs and other unspecified cars across the Pacific.
In the U.S., Cadillac has hit the big time with angular, aggressive vehicles that have many younger car buyers finally looking closely at the brand. It's repeatedly made headlines at the Detroit Auto Show with stunning concept vehicles. Sales are up this year, too, and Cadillac is no longer a slumbering giant.
Courtesy of the high-rolling Escalade and the relatively smaller CTS sedan, Cadillac has status again, the kind attained only through building flashier, better-made and higher-performance vehicles than it had in the past. That's a tremendous accomplishment, says Art Spinella of CNW Marketing in Brandon, Ore.
Though the Escalade wasn't on the initial China list, Cadillac is going to sell the CTS and STS sedans, the aggressive looking SRX wagon and the XLR convertible. "It isn't necessarily going to mean a whole lot of sales right away but it clearly puts General Motors in the best possible light," Spinella said.
GM's (
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news,
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profile) confidence in its ability to do business in China owes a lot to Buick, which gets a lot of respect in the country, where it is seen as a premium mark. And GM says there's room for more sales at the top with Cadillac.
"That's an incredible amount of growth and we want to be a part of it," said GM spokeswoman Toni Simonetti. GM also is working to get into the vehicle-finance market there too.
Cadillac isn't the only high-end automaker eyeing the mainland. BMW and Mercedes-Benz are already there. Like those high-end automakers, the General Motors unit is confident enough in local manufacturing that it will even assemble vehicles there.
Why China matters
Selling and building cars in China is complicated. But the payoff could be huge if the economy there grows at anything like it's current rate. For that reason, it's perhaps the most important end market for big-ticket consumer and industrial items, be they high-dollar cars or commercial airplanes.
To be sure, there are already well-placed concerns about Chinese auto-production capacity growing too quickly, complicated domestic and international commerce rules and a now familiar uncertainty about the country's political direction.
See David Callaway's take on doing business in China.
But the all-important U.S. auto market isn't growing like it once did and defending the Big Three's home turf is getting very costly. Emerging markets have always been attractive, no matter the potential roadblocks.
"What Cadillac is doing in China is similar to what Mercedes did in the Middle East," said CNW's Spinella.
And in China's case, the automakers can't afford to sit still as a relatively small pool of buyers grows month by month.
"It all has to do with risk-reward," said Dave Littmann, chief economist at Comerica Bank in Detroit.
Just as the Escalade has a prominent place in an increasingly global hip-hop culture, car ownership is accelerating the political and economic development in China, with clear ramifications for some of the biggest companies here at home.
"What used to be punishable by death is now something that has bragging rights," said Littmann.
Cars are being woven into Chinese culture and it's only a matter of time before someone over there is selling records singing Cadillac's praises.
August Cole is spot news editor at CBS.MarketWatch.com in San Francisco.
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Who will rap about Cadillac in China? 
