In February 1998, the Cadillac brand was in a coma, and General Motors' top executives knew it. They gathered in suburban Detroit to see chief designer Wayne Cherry's bold sketches for Cadillac vehicles -- a look some critics later called downright ugly. But before they would vote to place a $4 billion bet on Cherry's design, they game him 90 days to perfect a 3-D model.
Dave Guilford Automotive News
When General Motors' top executives gathered Feb. 3, 1998, to view design chief Wayne Cherry's new look for Cadillac, they were ready to gamble.
Inside the Design Dome at GM's Warren, Mich., technical center,
20-foot-long boards displayed dramatic sketches of an entry-luxury vehicle with a creased, slab-sided, sharply angular look. Then the executives viewed the alternative - a conservatively styled replacement for the lackluster Cadillac Catera.
"They completely rejected it," recalls John Smith, then Cadillac's general manager. "They looked at Wayne and said, 'You have 90 days to bring us the vehicle that you showed us in the dome this morning.' "
The big gamble
Skeptics had a field day when Cadillac floated a new angular look. Top: Sketches and models of the Evoq, the first concept with the theme. Above, a technician in GM's design studio works on a scale model of the Evoq before the concept was unveiled at the 1999 Detroit auto show.
Much more than a simple vehicle design was at stake. The board would have to spend $4 billion to bring Cherry's design to fruition. It would require a new rear-wheel-drive architecture, a new assembly plant and a new product lineup. Most important, it would require GM to break out of its bureaucratic slumber.
Cherry, criticized for dull designs in the 1990s, was eager to sell his radical new styling. To do so, he had teamed with John Smith to propose the sweeping changes.
President Rick Wagoner and the rest of the strategy board - GM's top decision makers in North America - were deeply worried that GM would miss the U.S. market's coming surge in luxury sales. Cadillac's geriatric image had to change.
Cherry's sketches challenged GM's executives to take the kind of risk that they usually avoided. But now Wagoner was willing to take a chance on the design. "It was clearly one that challenged people," Wagoner says. "While it was sort of shocking in its boldness, it was, upon reflection, something that fit. It felt right."
The board's 90-day deadline was the kind of challenge that Cherry - a workaholic even by GM standards - relished. He delegated his administrative workload and handpicked his design team. Cadillac's future was at stake. He had just three months to get it right.
Worry over Cadillac
The effort to transform Cadillac had begun a year earlier.
As much as GM's leadership wanted change, it would not commit lightly to a project that, in finance guy Wagoner's words, "ate up a lot of capital."
That's where John Smith came in.
GM's brass had summoned Smith to Cadillac a year earlier from his post as president of GM's Allison Transmission subsidiary. Smith found GM's top executives - CEO Jack Smith, Wagoner (then president) and GM North America President Ron Zarrella - deeply concerned about Cadillac.
"When I got there, it was clear, having talked not just to Ron but Jack and Rick and others, that they really wanted to figure Cadillac out," John Smith says.
GM executives desperately needed a strong luxury brand. But Cadillac was on the wrong side of shifting luxury-market demographics. Industry analysts were excited by the prospect of soaring sales of luxury vehicles to baby boomers entering their peak earning years.
But GM was saddled with a luxury brand that few baby boomers would even consider.
Sales of Cadillacs had declined sharply from their peak of 350,813 in 1978. Cadillac sold 182,570 vehicles in the United States in 1998, to rank second in U.S. luxury-brand sales behind Lincoln.
More significantly, Cadillac's sales were virtually flat from the prior year. Meanwhile, import brands were gaining rapidly. Lexus, for instance, sold 156,260 units in 1998, up 60 percent from 1997.
By 2000, Cadillac would place fifth among luxury makes. The brand's average buyer was 65, and baby boomers particularly were turned off by Cadillac's staid image. Cadillac's demographics had become a serious liability.
"It was all designed for blue-hairs," says Paul Haelterman, director of market assessment at CSM International in Northville, Mich. "They clearly recognized it and started to position the company to deal with that."
John Smith's timing was good in one key respect. GM had spent the previous five years under Jack Smith (no relation to John) pulling itself back from the brink of bankruptcy.
GM's first product splurge had been to reinvigorate its highly profitable full-sized trucks. Now it was ready to invest in another high-margin project with growth potential. Cadillac fit the bill.
John Smith's predecessor, John Grettenberger, says GM's financial bind in the early and mid-1990s prevented Cadillac from attacking its problems. Deeply shaken by losing nearly $5 billion in 1991 and another $2.6 billion in 1992, GM's board had forced out CEO Robert Stempel and embarked on stringent cost cutting.
"In that time frame, the corporation was just hemorrhaging money," Grettenberger says. "Things had to wait until the profit picture turned around."
Money crunch aside, Grettenberger's efforts to expand Cadillac's lineup bumped up against the brand-management orthodoxy reigning at GM.
Cadillac lost its opportunity to be first to market with a luxury SUV in the mid-1990s, Grettenberger says. North America chief Zarrella rejected the proposal, leaving the field open for the Mercedes-Benz M class and Lincoln Navigator. "My friend Ron Zarrella felt that GMC and Chevrolet could do well for GM in the SUV business and basically killed it," Grettenberger says. "In retrospect, it wasn't one of his best decisions."
Dinner with Zarrella
Early in 1997, John Smith found himself sitting across a dinner table from Zarrella at the posh Townsend Hotel in Birmingham, a Detroit suburb, to discuss the job at Cadillac. Zarrella may have blocked the Cadillac SUV, but Smith would find him a strong ally in rebuilding the division.
Smith recalls a lengthy, wide-ranging discussion. (Zarrella, now CEO of Bausch & Lomb Inc. in Rochester, N.Y., did not respond to several interview requests.)
Smith argued that GM needed a strong Cadillac because the public perceived it as "the best GM can do."
"If it can be competitive again with the noble marques, it will cast a very favorable shadow over the whole portfolio," he told Zarrella.
Smith added another goal. To be successful, Cadillac needed to sell vehicles globally. Its annual volume in the 200,000-unit range, with paltry sales outside North America, was a disadvantage when doing battle with BMW and Mercedes-Benz.
"Those guys were 600,000, 700,000 units a year globally," Smith says. "Some of that number were taxi cabs, but they still had that volume that was driving their total profitability. It was driving cash, it was driving the ability to reinvest in additional products."
Smith's remarks struck a chord with Zarrella. Smith became vice president and general manager of Cadillac in February 1997.
John Smith came into the job with strong allies. He had worked at GM Europe with Wagoner and Jack Smith.
Cadillac dealer John Bergstrom, chairman of the Bergstrom Corp. dealership group in Neenah, Wis., says John Smith was given broad freedom to reshape Cadillac.
"Jack Smith and Rick said, 'We'll get you the money, but you've gotta bring this whole thing around to be a crown jewel,' " Bergstrom says.
When John Smith arrived at Cadillac in 1997, the SUV issue still was simmering. The Mercedes-Benz M class and the Lincoln Navigator were winning the race to market. Archrival Lincoln's SUV particularly was galling; it would sell 26,831 units in seven months that year and 43,859 in 1998.
Legendary Texas dealer Carl Sewell, then head of the Cadillac dealer council, says missing the luxury-SUV market infuriated dealers and soured relations with Zarrella.
"As head of the dealer council, I just had terrible arguments with Ron Zarrella," says Sewell, chairman of Sewell Automotive Cos. in Dallas. "Ron was not going to let Cadillac have a utility. He was adamantly opposed to that - and that is not secondhand knowledge."
But nine months after he arrived, John Smith had won approval for the first Escalade.
"The door was opened for us by Jack Smith," John Smith says. "He called me in August of '97. We were chit-chatting about a couple of different things, and at some point he asked me, 'Don't you think you need a truck?'
"I remember telling him, 'Yes, I think we need a truck, but not everyone between you and me thinks so.' He paused for a minute and said, 'I might be able to help on that.' "
Top: The Cadillac CTS concept. Above: Cadillac General Manager Mark LaNeve and Vice Chairman Robert Lutz show off the high-performance CTS-V in April 2003.
"Everybody knows that John Smith literally stood on his desk and screamed, 'We need SUVs at Cadillac, and they need to be the best in the land,' " Bergstrom says.
The initial Escalade - a thinly disguised GMC Yukon Denali - didn't impress auto critics. But John Smith says it gave dealers hope. And it made lucrative profits for Cadillac in 1999, when it sold 23,897 units at a base price of $46,525.
Winning the Escalade was a Band-Aid compared to Smith's bigger challenge. Cadillac - once a brand as bold as the outlandish tailfins on a 1959 Eldorado Seville - lacked a clear identity.
Cadillac's advertising was one symptom. In keeping with Zarrella-era practice, brand managers advertised individual vehicles in separate campaigns that minimized their connection to Cadillac.
The approach was an obvious dead end, Smith says.
"You can pretty quickly reach the conclusion that this strategy in toto will not work," he says. "There will never, ever be enough money for the individual brands (vehicle nameplates) to go out and create enough awareness for themselves. There will never be that kind of money. The center has to be strong, has to be meaningful, has to be a store of value."
The solution, Smith says, was to build "a clear, concise and compelling" identity for Cadillac. To do so, he turned to Cadillac's past. Smith pored over past marketing materials and prowled GM's Cadillac Museum, an anonymous-looking building in an office park near the technical center that GM has stuffed with classic models of the past.
Smith developed the theme Art & Science, referring to Cadillac's heritage of head-turning styling and sophisticated technology. For the "art" part of the formula, Smith enlisted Cherry.
Today, Cherry says the work to develop a design theme for Cadillac occurred at a sweet spot in corporate history. Designers' ever-present urge to push the boundaries coincided with a corporate need for dramatic change.
"There was a push and a pull," Cherry recalls. "That's when you can really make something happen."
'Severe, crisp, sheer'
One defining moment came when John Smith, Zarrella and Cherry spent a day in 1997 visiting motorcycle manufacturer Harley-Davidson in Milwaukee.
They were impressed by Harley-Davidson's ability to restore an iconic American brand. But Smith says the visit had two lessons: "One, it can be done. Two, we can't do it the same way."
Cadillac couldn't trade on its 1960s-era image because, unlike Harley-Davidson, it represented the Establishment.
"Harley-Davidson could keep people in Easy Rider mode for three or four decades," he says. "But establishing a spiritual stake in the ground with the '60s wasn't going to work. That was not a particularly kind decade for Cadillac."
Cherry wasn't looking to recreate the past, anyway. He pushed his designers for a high-tech interpretation of traditional luxury cues.
"If you look back through the history of the automobile, premium brands - and even a lot of Cadillacs - would develop very sheer surfaces with these nice creases on them," Cherry says. He recalls that former GM design head Bill Mitchell used to talk about "the crease in the trousers."
But Cherry didn't want cars that evoked a 1950s gray flannel suit, however sharply pressed. He pushed for "this more severe, crisp, sheer look to it - more computer-derived styling," he says.
That was the look that Cherry put up in full-sized renderings on the walls of the Design Dome. And that was the look that, following the February 1998 strategy board meeting, he converted into a full-sized, three-dimensional prototype of today's CTS within 90 days.
Design was central
The Art & Science plan embodied more than design. John Smith wanted to move most of the Cadillac lineup to rwd, which allows the performance and handling craved by younger premium buyers. Designers take advantage of the distinctive proportions of rwd cars, with the longitudinally mounted transmission, to sculpt the longer hood of classic luxury cars.
Beyond that, Smith proposed a new dealership design. And Cadillac, never a strong global player, would develop a strategy to sell vehicles in Europe and Asia.
Overall, "Art & Science" had a hefty price tag. GM would pay billions for the new vehicle architecture, the development of new vehicles with top-end componentry, a new plant, subsidies for new dealerships, and the overseas sales push.
"The number that's been thrown around was $4 billion, and that's pretty close," Wagoner says. "It was a massive commitment."
Still, it all hinged on design. Without standout vehicles that excited buyers, the other measures would be futile.
That put enormous pressure on Cherry. Smith says Cherry "broke all his own rules in design staff" in the 90-day sprint to build a prototype for the strategy board.
"He went into every studio - it didn't matter if it was Olds, Pontiac, Buick - found his very best people, brought them down to the Cadillac studio and said, 'All right, this is the job we have to do.' "
The team produced initial sketches and began winnowing them down. By March, it had a full-sized clay model of the future CTS.
"It amazes me when I go back and check the dates," Cherry says. "And by April we had a full-sized, see-through foam model."
In May, the strategy board gathered in a design studio in the technical center. Ever the showman, Cherry set up two large storyboards, then pulled them aside to reveal the car - the first foam model GM had done with working headlights and taillights.
"When we pulled off the cover, we got a round of applause," Cherry says. With a laugh, he adds, "That may have been for how fast we did it."
But the board's embrace of the new design theme was real, as evidenced by the current CTS. The foam model shown in May 1998, Smith says, "was the CTS in virtually the same form as what's on the street today."
Imre Molnar, dean of the College for Creative Studies in Detroit, says the Cadillac design was a striking break with the aerodynamic look that governed automotive styling in 1998.
"It was a really courageous step," Molnar says. "At the time, it was so refreshing because everyone was doing such soft stuff."
Ron Zarrella, president of GM North America, second from right, stood by the risky designs when customers had doubts at clinics. With him are the 2003 CTS and, from left, GM executives Tom Davis, Robert Lutz and John Devine.
When the board approved the new design, the die was cast.
Wagoner recalls that the strategy board prodded Cherry not to compromise on the CTS. When the board saw the prototype in May, Wagoner recalls, "We said, 'Oh, jeez, they did what we asked. Now we're going to have to do it.' "
Next, John Smith lifted the curtain to allow the public a glimpse of Cadillac's plans.
In a May 1998 gathering of 100 Cadillac "master dealers" at Turnberry Isle Resort in Aventura, Fla., Smith gave a shorter version of his presentation to the strategy board. He noticed that "everybody was paying attention, even the dealer wives."
"The other thing I noticed was that there was a lot of activity in the back of the ballroom," Smith says. "What I discovered later was that I had about 25 minutes to do this and I took about an hour and 15. What they were doing in the back was re-racking the golf lunches and re-racking the golf tee times."
A more striking display was coming. Even as Cherry's group worked on the CTS prototype, he assigned another team to develop the Evoq concept roadster for the Detroit auto show, 11 months away in January 1999.
The Evoq alerted the public to Cadillac's intentions, although the slab-sided look was derided by many as chunky and ugly. In fact, the radical new design was beginning to scare some GM executives.
As the CTS went to consumer clinics, Cherry acknowledges, "People were somewhat shocked by the vehicle. To some extent, not totally, that's what we wanted."
John Smith moved in February 2000 to head GM's Service and Parts Operations in Grand Blanc, Mich., about 60 miles north of Detroit. He was replaced at Cadillac by Mike O'Malley, who had headed GM's North Central Region. As doubts swirled in GM executive suites, Zarrella called Smith.
"I had heard that the clinics weren't going so well, and Ron called me up and said, 'We're getting clinic feedback that's not very encouraging on the CTS. What do you think?' " Smith says.
"I said, 'I don't think we did clinics back in the '40s and '50s when Cadillac was kicking ass."
Smith and Cherry credit Zarrella with hanging tough.
"There were some on the strategy board who began to evidence eroding confidence in the Art & Science strategy - I would underscore the word 'some,' " Smith says.
"I give Ron a lot of credit for acting sort of like Henry Fonda in 12 Angry Men and saying, 'We've made this call, it is the right strategy for Cadillac, and we're sticking to it.' "
Wagoner acknowledges that consumer clinics were troubling. But he says GM's leadership felt that Cadillac couldn't succeed by imitating other brands.
"At that point, if you tried to position anything as a luxury car, it had to look like a BMW or a Mercedes or it wasn't considered," Wagoner says. "We said, 'That's exactly what we don't want to do.' The me-too strategy is not a good one."
But, Wagoner adds, "I'm sure there were plenty of sleepless nights amongst a lot of people."
The tension carried through the introduction of the CTS in late 2001. Many reviewers admired the vehicle's performance but remained cool toward the styling. A representative comment from Motor Trend: "The CTS certainly makes a bold statement, but we're still not sure what language it's speaking."
Today, the daring design has established itself in the marketplace.
The Escalade and CTS have pumped up the division's sales. The CTS is enjoying a strong second year with 34,078 units sold in the United States through August, making it Cadillac's second best selling nameplate after DeVille with 51,753 sales in the same period. And the Escalade has proved popular with athletes and rappers, bestowing an unaccustomed hipness on Cadillac.
The glitter is continuing this year, as Cadillac rolls out the Evoq-based XLR luxury roadster and the SRX sport wagon. A review in The New York Times said the XLR "compares well with the more-expensive Mercedes SL500."
Cadillac's struggle is far from complete. It sold 199,748 vehicles in the United States in 2002, 9.4 percent over 1998's figure. But import brands such as BMW, Lexus and Mercedes-Benz still outsell it.
And though the average age of a Cadillac buyer has dropped from 65 to 59, the division is just beginning to win consideration from luxury shoppers who prefer imports. Launching the next three vehicles - the SRX, XLR and STS - is critically important to solidify Cadillac's initial gains.
But Cadillac now gets some respect in the luxury market, a striking transformation for a brand that seemed headed for irrelevancy.
Product Editor Rick Kranz contributed to this report