Economic Evolution in the Great Lakes State
1:14 pm
Mon July 18, 2011

reWorking Michigan: Lansing positioned for role in expanding Cadillac buyer segment

LANSING, MI –

About 800 workers at General Motors' Lansing Grand River plant are back at work this morning after a five week break. During the hiatus, the automaker spent about $90 million on the facility, getting ready to build a new, smaller Cadillac starting next year. The new model is part of the company's ongoing effort to lure more buyers away from European luxury cars. WKAR's Mark Bashore brings us up to speed in this ReWorking Michigan report. | SKIP down to article

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General Motors is already riding a wave of optimism thanks to the recent success of the Chevrolet Cruze, suddenly the top-selling small car in America. That's a segment often dominated by Toyota and Honda. The automaker's hoping for a similar kind of magic with the smaller Caddy. Grand River plant manager Scott Whybrew explains all those millions went into retooling equipment so that more than just the CTS---Cadillac's flagship model---could roll off it.

"We basically put a new architecture in the plant," he explains. "The new smaller Cadillac---we had to have more flexibility in the tools. So the new process that we put in place can accommodate both of those, so it basically has more adjustability in it."

Though GM hasn't officially identified the new offering, everyone expects it to be the ATS, a downsized variation of the CTS. Leaked specs about the new model indicate a two-liter engine with standard transmission could get over 30 miles per gallon highway--better than any other Cadillac model. The aim is to peel away buyers of similarly sized European models like the Audi A4 and the Mercedes "C" class.

This is hardly the brand's first shot at downsizing. The 80's saw the smaller "Cimarron" and the 90's the "Catera." Both vehicles were based on non-Cadillac cars GM was already producing. Kristin Dziczek is an analyst with the Center for Automotive Research in Ann Arbor. She says that, unlike those efforts, the goal is to downsize without sacrificing style or performance.

"Building off the CTS's success, they're taking a lot of the same cues," she says. "They're giving it luxury level performance and that's, I think, what's really the difference than just taking a Chevy and putting a Cadillac badge on it. This, I think, is pretty well positioned."

To launch the new model, 600 new hires will start working a second shift at Lansing Grand River sometime in 2012. Bob Scherer of the Capital Area Manufacturing Council says the economic impact of the launch alone is considerable.

"An assembly plant typically, (an) auto assembly plant typically has the highest multiplier of any single economic activity," he explains. "The estimates vary widely from four to ten, so 600 jobs translates into several hundred or thousand more elsewhere. That doesn't mean they're all in Lansing, but it does create jobs elsewhere throughout Michigan and perhaps even other states."

There's another advantage for Lansing as well, as city income taxes from a growing workforce adds to strapped public revenues.

Other trends are also in play. As mileage standards and gasoline prices go higher, so does demand for smaller, lighter vehicles of all types. Those factors lead analysts like Michael Robinet of IHS Automotive Forecasting to suggest that GM--and Lansing--be patient as buyers get acquainted with the new car.

"Don't be surprised if at some point, this vehicle is looked at as a strong export vehicle for Cadillac," he says. "It may not be right away, but certainly down the road, it's a possibility."

General Motors Chairman Dan Akerson created a stir recently with a withering comment about his European competition in the small luxury segment. Mentioning Mercedes' C' class vehicles, he quipped "that's C as in average.'" GM clearly wants to grab a larger share of this market. What's created here in Lansing could determine the outcome of that effort.

reWorking Michigan
For more on job creation and workforce evolution in Michigan, visit WKAR.org/reworkingmichigan

 

 

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