Cadillac to give ATS breathing room by trimming CTS output

DETROIT -- We've heard a lot about how Cadillac's new ATS compact sedan was built to lure buyers away from the BMW 3 series and other German luxury juggernauts.

That might yet happen. But, at least early on, the ATS is poaching buyers from its older and larger sibling in the Cadillac lineup: the CTS.

CTS sales have nosedived in the wake of the September launch of the new ATS, sinking 40 percent in October from a year earlier.

CTS is one of the most cross-shopped vehicles among potential ATS buyers, data from Edmunds.com shows. Happily for Caddy execs, the 3 Series also is up there on the potential ATS buyer's list.

Such overlap is natural when a new nameplate infiltrates a lineup. It's a phenomenon that General Motors has a plan for, says Chase Hawkins, Cadillac's U.S. sales chief.

Hawkins told me this week that GM will dial back CTS production next year. That will prevent CTS sedans and coupes from piling up on dealer lots and forcing GM to load heavy incentives on them or dump them into rental fleets. GM resorted to those tactics often in the past, and Cadillac's brand still is recovering from it.

"We've planned for ATS to take some CTS customers out of the market who we otherwise would have seen," Hawkins says. "We definitely are going to be producing fewer CTSs next year to create some of that space for ATS."

Hawkins believes there will be less cross-shopping "as ATS grows up a bit."

But the key actually might be the growth of CTS -- literally. The next-generation CTS will be a bit longer and pricier when it hits showrooms by late 2013. That'll create more separation from ATS and allow the CTS to go head-to-head with BMW's 5 series and mid-sized luxury sedans.

Market prognosticators would do best to wait until 2014, the first year that the next-gen CTS co-exists with the ATS. Look for whether GM can grow CTS sales (on pace for about 45,000 this year) and sell a greater number of ATSs -- with both models stealing at least modest numbers of import buyers.

Check that box, and GM execs can have confidence that their Take-on-the-Germans strategy has legs.