Cadillac's Johan de Nysschen on Escala, Cue, and How the Brand Can Improve

After a long career at Audi, Cadillac boss Johan de Nysschen sat withMotor Trendto discuss where the surging American luxury brand is headed.

What can we take away fromthe Escala concept, especially as it was made in a production studio rather than a design shop?

Being that it's built on the Omega architecture, it is far easier to turn into a production car than any of its predecessors. From an architectural, practical, execution point of view, (the Cien and Elmiraj) couldn't be done. And this one can be done. The CT6 is a competitive flagship car, but the aspiration the team and I have for Cadillac is that we have to reach higher. Whether it's in the form of a large luxury four-door sedan or a stunningly executed crossover, we will let the market tell us.

Is Escala more than a design concept?

Cadillac has pushed bold, courageous design for quite some time, but it needs to evolve. Must be evolutionary, not revolutionary, because if it's revolutionary, then it disconnects people from what they associate with the brand. And it distances us from our current portfolio, which is not a smart move. When you look at (the Escala), you instantly recognize it as a Cadillac. We have taken Art & Science design in an organic direction from the hard and crisp wedge shape by loading the beltline and revisiting the proportions of car—from wheel height to body depth to the greenhouse to the overhangs. Regardless of the vehicle's size, the proportions will be consistent. We don't want to abandon the vertical light signature, but we introduced a horizontal component that enhances the visual mass and stretches the car optically to be low and wide. (This) sporty muscularity plays into how we want to position the brand. It really does announce what the future is for Cadillac design.

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How do you see Cadillac competing against the German and Japanese luxury brands?

The brand is on a mission about large-scale total transformation, whether it's a concept or how we function, the customer experience, marketing communication—it's a total rewriting of our approach.

There have been complaints about the CUE infotainment system.

Its execution is much better today, in regard to features and speed of response and operator engagement. The next-gen CUE is completely reconfigured and will have a dual approach with a touchscreen and a rotary controller. Some things lend themselves better one way or another. We will give customers a choice of how to interface. The rotary controller conveys through haptics a feeling of quality and creates an emotional bond and feeling of interacting with a precision-crafted automobile. The first-generation CUE didn't even meet our own expectations. So for the benefit of customers, we will have to overcompensate.

Where does this place infotainment in the future?

Look at the amount of data we bring into our cars. GM is unrivaled in this, and where we are today is Mickey Mouse compared to where we are going. You can download a feature-length Netflix movie in two seconds. That's the capability we have in the future. Overlap that with autonomous capability, with semi-autonomous driving as a building block with super cruise, that means that both driver and occupants are going to be liberated under certain circumstances from the chore of driving. But what do you use that connectivity for? What do you do with all this data? That brings us to the point of traditional form of interior design of cars. The interaction between driver and vehicle needs to be carefully configured. There is a whole new look at the use of displays as part of the architecture of the car. Put them anywhere in any shape. You could put video technology on the roof pillars, and with that technology, you could make the pillars invisible.

Can you provide any details about the Escala's new 4.2-liter twin-turbo? How does this make sense in an era of 52-mpg CAFE targets?

We are car enthusiasts at Cadillac, and it's hard to imagine for us to make a credible brand statement of sophisticated refinement and emotional appeal without a modern eight-cylinder engine. I'm not announcing it for production yet. We are just illustrating some things we are contemplating. We can also embrace new-energy vehicles. There's not an automaker not contemplating electrification. But the internal combustion engine has a lot of headroom for efficiency improvement and will be around for a long time. We can effectively utilize the time runway to develop and commercially amortize a modern generation of engines in parallel to introduction of plug-in hybrid tech. But in the longer run, we're looking at full electrification.

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Where do you see the luxury market headed?

Our industry has been surprised by the speed of consumer movement from sedan to crossover segments. No doubt the last two years of sales have accelerated through low energy costs. Whether the global trend will continue once energy prices escalate remains to be seen. The focus for Cadillac was for building cars of profound substance as building blocks to developing our brand credibility. Sedans are about dynamics and luxury refinement that sets the bar higher than crossovers do. But it's hard to run against market headwinds and consumer demand. There is a lot of white space that Cadillac does not occupy and segments we need to enter. The offensive over the next years is unprecedented and will include significant expenditures in our crossover portfolio with entries between Escalade and XT5 and below XT5.

How does Cadillac fit with sharing platforms and component sets with other GM brands?

All luxury brands face the same challenge. As Gen X and Gen Y enter the luxury market, by 2020, 75 percent of luxury cars will be purchased by them, displacing baby boomers. In part, millennials have grown up in homes familiar with luxury brands, and they have aspirational tastes. But they also live in megacities with higher cost of living and the complexities of vehicle ownership. All carmakers want to position themselves in lower segments as a brand intercept and to build loyalty. The problem is, whether you are Audi, Cadillac, or BMW, it is very difficult to get economies of scale in emerging segments with a dedicated architecture. And if you cannot, then it's impossible to achieve the required price point. So you have to go to commonality and share across mainstream entries to get the economies of scale. Some companies simply will be willing to invest more in technology and feature design differentiation than others. Not because of competence but the allocation of resources. For Cadillac, we will follow the avenue where sedan architecture's dynamic requirements play a larger role in the buying decision than those in the crossover space. Cadillac sedans will be unique architectures. With crossovers, the design and functional appeal are more important than Nürburgring lap times. We don't need to make the investments that add a lot of costs. GM knows something about crossovers. They do them extremely well. The portfolio plan draws on common SUV architectures with a modular approach, with different suspension systems for Cadillac than for the lower-priced architecture. With powertrain differentiation, turbo technology opens wide the bandwidth for performance tuning. The same applies with battery-electric technology, using the same hardware but the software completely changes the character of the car. We're going to work on communizing and maintaining synergies but make sure positioning is very true.

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Where does Cadillac still need to improve?

We need to advance on many fronts. On the production front it's a matter of getting portfolio right. We have momentum with the Omega architecture and the full extent of a lot of financial and engineering resources. So that is carrying on.

On the marketing front, the media proclaim the merits of Cadillac widely, and we need to make sure consumers become as familiar. A lot of perceptions are rooted in the past. It takes a long time for these perceptions to be shifted to the realities. Not only the products but the marketing communications and the brand personality, which have to match the experience at the retail level. To make someone swing by a Cadillac dealership before Mercedes, that's where the brand promise must be kept. Cadillac's (J.D. Power customer service index scores) are pretty good. So the experience is not the concern. But we have a large dealer body with 925 stores, and only about 180 are brand exclusive. The balance is multiline stores, offering various combinations of other GM franchises. And 412 of our stores sell fewer than 100 Cadillacs a year, which tells you the other franchises are the anchors and Cadillac is an appendage. The means we must realistically anticipate that when a customer experiences Cadillac, it will be in a Chevrolet or GMC brand environment. If a Mercedes, BMW, or Lexus customer has bought into a brand promise, then that brand experience is why they are attracted to luxury experience. If we are targeting Chevrolet customers, then we are not fulfilling our brand promise. I'm not saying Chevrolet gives bad service. But from another perspective, Marriott also owns Ritz-Carlton. When you check into Marriott, it's nice but a different experience from Ritz-Carlton. So if half of our stores are meeting a different set of customers, you should not be surprised when other customers coming from Mercedes say, "This is not what I expected."

So you want to get rid of dealerships?

People say we are overdealered, and conventionally, yes, that's true. But that is the hand we've been dealt. We can turn that into a competitive advantage. We have a density of market coverage ahead of customers and with better proximity. And we can reach into smaller communities where our competitors can't go. We're going to roll out a distribution model that capitalizes on our network while delivering a luxury experience. We call it Project Pinnacle. It fundamentally challenges the status quo. Unless we are able to elevate the retail experience commensurate with the product substance, then we have a table with three legs.

China is so important. Is Cadillac considering a China-only vehicle, or mightAmerican buyers have to deal with vehicles that come with a China-first sensibility?

The short answer is yes. Part of our challenge is we've been U.S.-centric forever. We build cars for the U.S. market and figure out where else we can sell them. That is not an achievable model for a global brand when we need breadth and width. China has to be our second-volume market. Obviously, we will go to Europe, too, but near-term is China. And China has unique requirements. There's the pace of electrification, and Chinese buyers are younger, and they participate in the entry-luxury segment. They will play an influence as to how cars are conceived and conceptualized. That said, customers are not that different all around the world. They are pretty common. So while we need to play to various markets in terms of powertrain, in terms of overall product concept things are pretty similar. But for an entry-luxury crossover that sells more in China than in the U.S., we will take the environment of China into account.

Anything else?

In China our brand is well known, and it's sold only in an exclusive retail environment. It's the fastest-growing luxury brand, and it represents a set of opportunities. In the U.S., there are deeply entrenched brand perceptions, the size of the dealer body, and the reality of customer demographic that we need to address. No brand is perceived well when you are constantly on sale. We have to elevate the brand in terms of perception, quality, sophistication, technology, and the ownership experience. And we have to charge a fair price. Now, we can't just be expensive for the sake of it. We need to have discipline in our go-to-market strategy. We cannot have people buying into the brand because it is at an attractive price offer. We have to move people away from buying Cadillac because it's a good deal. The value perception is important, but we have to put more discipline into pricing, with competitive incentives, but not fire-sale incentives. It's working. We've seen our average transaction price go up 17 percent over the last two years. We've seen it with ATS, CTS, and now XT5 increases. The net result is that our average transaction prices in aggregate are even with Mercedes, and in some months we are ahead of them. But the natural consequence is that past customers who bought for an attractive lease price won't come back. And we have to be OK with that. When I am running Cadillac as a consolidated enterprise, I can slow U.S. growth while enjoying strong growth in other markets. And a dollar in the bank doesn't matter where it's coming from. There is a strategy behind this, and not of months but of years.

Can you provide an update on the rumors of a mid-engine performance coupe shared with Corvette?

I go online every Sunday morning to read those stories for my entertainment.