From Cadillac, a small model with big ambition

January 9, 2012: 11:47 AM ET

GM's resurgent luxury brand finally has something it's needed for a long time: a posh, entry-level vehicle to fight Audi, BMW and Mercedes.

By Doron Levin, contributor

Cadillac ATSFORTUNE -- Cadillac's debut of the entry-level ATS sedan at a Detroit gala on Sunday night is the final component in a decade-long attempt to revive General Motors' luxury brand. The Detroit auto maker is bringing to market a full range of models that it hopes will broadly compete with Audi, BMW and Mercedes-Benz.

The ATS will be the lightest and smallest Cadillac when it comes off the assembly line this summer in Lansing, Michigan. It's meant to intercept buyers of the Audi A4, BMW 3-Series and Mercedes-Benz C Class. GM (GM) is aiming the vehicle at customers shopping for their first luxury vehicle as well as those seeking better fuel economy. "The first group we call the 'move ups,' and it's their first chance to make a statement," said Don Butler, head of Cadillac marketing. "The second group, a slightly older demographic, is the 'made its.'"

Buzz around the new model's introduction has been building among auto enthusiasts and car blogs for months. Aaron Bragman, an analyst for IHS Global Insight, said "ATS looks to be the business. It's the closest anyone's come to competing with 3-Series and C Class. It's light weight, it looks good."

Competition in the space is white hot, however. Butler and other GM executives insisted that ATS will best German luxury models in comparison. The four-door, rear-wheel-drive sedan comes with a choice of three engines. A diesel model will be available later. The car also features Cadillac's new CUE telematics system with an interactive screen for controlling vehicle functions and entertainment, designed to emulate the features of an Apple (AAPL) or Google (GOOG) Android device.

The trickiest bit for GM will be to further position the Cadillac brand to compete with German automotive charisma and snob appeal. BMW this year is introducing a new generation of its 3-Series, which is likely to continue its popularity and maintain competitive pressure in the entry-level segment. Mercedes gave its C Class a facelift last year and Audi has been pushing ahead in the U.S. market with aggressive marketing of its models as well.

Cadillac lagged far behind the top German luxury makers in 2011, with total sales of 152,389 vehicles last year, up 3.4% from a year earlier. BMW, the luxury sales leader in the U.S., sold 305,780 vehicles for the year up 14.5%. About a third of BMW's sales were 3-Series or smaller, segments in which Cadillac had no products.

This isn't GM's first try. In an earlier era, Cadillac attempted to lure young buyers with the Cadillac Cimarron, a warmed over Chevrolet Cavalier, followed by the Cadillac Catera, a thinly-disguised Opel Omega imported from Germany. Butler dismissed any comparisons to those models as invidious. "We designed ATS from the ground up," he said.

GM hopes the ATS will also find a market in China, where upwardly mobile consumers have been flocking to the German brands. Until now Cadillac's midsize CTS was the main entry in that market, but it has proved too large for Chinese tastes and pocketbooks. "The ATS with the smaller engine falls below the threshold that would make it subject to a Chinese tariff," said Bragman. (GM's Buick brand, a sleepy favorite of retirees at home, is very strong in China.)

GM hasn't been shy about proclaiming Cadillac "the new standard of the world." With a fully fleshed out model line up, it can finally begin putting its new motto to the test.

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