GM's fearless bid to trounce BMW

July 19, 2012: 4:04 PM ET

After years of trying -- and failing -- General Motors finally has a shot at giving the German luxury manufacturer a run for its money.

By Doron Levin, contributor

FORTUNE -- With the introduction of the Cadillac ATS, General Motors Co. (GM) is anchoring its model lineup with a compact sedan aimed straight at the BMW 3 Series, Mercedes C-Class and Audi A4 -- the German triad that dominates global luxury car sales.

In several key metrics, the ATS can credibly challenge the German models in a manner the U.S. carmaker so far has failed to do. Equipped with a 2.0-liter turbo engine, the ATS is lighter than the comparative BMW 3 Series and a touch faster with a 5.7 second 0-to-60 miles per hour time compared to BMW's 5.9 seconds. The two rear-wheel-drive models both are laid out with weight distribution and suspension designed to make them nimble and score high on the "fun to drive" scale.

The ATS is priced competitively, rather than at a discount, in order to attract buyers that might be skeptical about Cadillac's claim that it's ever bit the equal of the 3 Series. "If you want to sell to luxury buyers you don't do it apologetically," said Kurt Gehring, a Cadillac executive at a media test drive this week in Atlanta.

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"The car is very stylish inside and out, the best rendition yet of Cadillac's 'Art and Science' design them," introduced a decade ago when GM committed more than $1 billion to remake its luxury division, said Csaba Csere, a contributor to Car and Driver magazine and former Ford (F) engineer.

"The structure is solid," he added, though he quibbled with the space in the rear seat, which he said felt "tight." He also pointed out that ATS's 10.2 cubic foot trunk is significantly smaller than those of the 3 Series, A4 or the C Class.

The key question for GM is whether savvy shoppers for luxury compact segments, who normally default to one of the German brands, will add the ATS to their consideration lists. The stakes are bigger than just bragging rights. GM is selling against German automakers in the burgeoning China market. GM also wants to eventually compete in Europe, as well as gain a bigger chunk of the luxury segment in the U.S.

The compact sedan category is the biggest segment in luxury vehicles and a portal through which GM and Cadillac hope to attract consumers to larger luxury sedans such as the CTS and XTS, to the SRX crossover and Escalade sport-utility vehicle. Doing that will no doubt be a long, difficult slog.

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When Cadillac introduced the first CTS a decade ago it was well received by reviewers and by consumers, although it was too large and heavy to appeal to the younger "fun to drive set" that was considering BMW's 3 Series. Because the 3 Series routinely is voted the gold standard of luxury sedans, GM decided five years ago to proceed with an entry that goes head-to-head with nearly the exact dimensions.

The ATS can be equipped with a less-powerful 2.5-liter engine and a performance 3.6-liter V6. The various configurations will sell from about $34,000 to $49,000 with all available options.

Manufacture of the ATS begins within a few weeks at GM's assembly plant in Lansing, Michigan and will begin to show up at Cadillac dealerships in August. The new model will be advertised on NBC during the opening ceremony of the Olympics, using footage of the car navigating a variety of exotic roads wind-swept Patagonia to the Atlas Mountains of Morocco.

Fittingly, GM's advertising campaign is entitled "ATS Challenges the World." Indeed.

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