General Motors Case Analysis

RUNNING HEAD: General Motors Case Analysis

General Motors: Cadillac Case Analysis

Situation Analysis
In 1986, Lloya Reuss, who was the Executive Vice President of all North America car operations for General Motor (GM), set new goals for GM to achieve because the task before Reuss was an ominous one. In 1959, when Reuss joined General Motors, GM and Cadillac had huge changed. Also, during that time, the U.S. auto market belonged to the three domestic producers (GM, Ford and Chrysler), and Cadillac was the “standard of the world.” Yet, after 30 years, the domestic producers’ market share has decreased, and Cadillac’s competition was not only by domestic market but also by Asian and European competitors. (1)

Nature of Demand
The U.S. luxury car market can be classified into two segments: traditional and functional. Cadillac was one of the traditional types, so customers have demanded the best in traditional luxury cars. Indeed, these traditional Cadillac consumers were most often professionals, above average in income and education. Also, the average age of customers was 58 years old, and they were used to purchase the biggest and most powerful cars. However, the situation has been changed according to the demographics of 1988, it shows below: (12)

Median Age %<35 Median % colleges

Age Income Grad+

Cadillac 62 2.5% $61.1 38.4%

Sedan de Ville 62 6.9% 61.0 40.3

Brougham 65 0.3 53.2 27.4

Eldorado 60 4.1 70.2 39.7

Seville 63 1.6 90.0 47.2

Allante 54 6.1 150.0 47.1
Cimarron 60 9.5 45.2 47.0

By different style of the cars that Cadillac produced, Cadillac targeted age was different, but Cadillac was trying to keep its brand loyalty customers. However, Cadillac wanted to aware younger buyers who want the luxury automobile, such as Allante was the new and unique car for age was 54.

From the year of 1985 to 1987, cars sale of Cadillac were 298,762, 304,057 and 261,284 because other import cars, international currencies and fuel costs affect customers’ decision. Also, consumers want quality performance in addition to stylish design expected luxury automobile attributes.

Extent of Demand
In 1959, General Motors used to be the number one in the auto industry (42%), but after thirty years, Cadillac’s market share and reputation has fallen 67.8% because of international competitors. In the mid-1970s, the U.S. auto market was affected by the high cost of fuel, so Cadillac downsized products. As fuel costs stabilized in the 1980’s, consumer analysis not done, therefore did not know about consumer wants and desires in automobiles.

Cadillac tried to expend its auto market, so it began to focus on younger adults by producing new design cars. If Cadillac did not offer the right balance, it might lose traditional buyers.

Cadillac is one of the divisions of GM, so there are certain parts of the Cadillac such as chassis or platform became interchangeable with other models of GM such as Buick Electra and Oldsmobile 98. So, it may confuse consumers …was this truly a Cadillac? Or is it a Buick Electra with a Cadillac body? Etc.

Nature of Competition
The U.S. automobile market begin to shrink from approximately 96.5% in 1957, to 85% in 1973, to77% in 1979, and to 68% in 1987 because the huge imports were from Japan that is the world’s largest producer of motor vehicles. (2)

Domestic competition
o Ford’s Lincoln was not far behind Cadillac in 1979 – Town Car/Coupe, Lincoln’s equivalent to the de Ville was downsized to dimensions similar to the Cadillac. For example, Cadillac de Ville/Fleetwood offered traditional large, 4-door, 6-passenger, rear wheel drive, V-8 engines. While Ford’s Lincoln Town Car are of the same configurations. (3)

o According to the domestic sales, Lincoln sold 165,138 units in 1985, 177,584 units in 1986, and 166,037 units in 1987.

o Chrysler competed in all other fuel efficient, economical market segments and was never really a threat to Cadillac as the leader in the luxury car market.

Foreign competition – European luxury cars emerge as serious alternative types of luxury automobiles. [Functional luxury cars] 1980’s

o Rolls Royce of England – renowned as the producer of expensive, hand-built luxury cars (not a competitor of Cadillac). (4)

o Mercedes-Benz – provided a silky smooth ride with firm, supportive seating and a controlled ride in an automobile engineered for traveling at high speeds on the German autobahn. Considered to be the ultimate car in