Cadillac told dealers that it reduced CTS prices "after receiving feedback from both dealers and customers" to "enhance its competitiveness in the marketplace and to help you sell more cars."
The price reduction comes amid a U.S. sales slump. Cadillac sales fell 7 percent last year, compared with a 6 percent increase for the luxury market overall.
Dealers have complained that Cadillac is trying to price its newer entries head-to-head with BMW and Mercedes -- a strategy that has proved hard to swallow for some returning customers. Sticker prices on the '14 CTS, launched in fall 2013, ranged from about $6,000 to $15,000 higher than the previous generation.
Cadillac dealer Howard Drake, who is chairman of Cadillac's National Dealer Council, said in an interview last month that the council had expressed concern that Cadillac's pricing is too high.
"None of those reservations have been alleviated by our sales performance," said Drake, owner of Casa de Cadillac in Thousand Oaks, Calif. He said one nameplate has been able to command the loftier prices without incentives: the redesigned 2015 Escalade SUV, launched last spring.
U.S. sales of the CTS remained resilient last year in a tough market for midsize luxury sedans. The car's U.S. sales slipped 4 percent to 31,115 units last year, compared with a 3 percent decline for the segment. The decline in CTS sales was not as steep as its key competitors, including the BMW 5 series (down 7 percent to 52,704 units) and Mercedes E class (off 5 percent to 66,400).
But those CTS sales required steeper discounts. The average incentive on the car last year was $9,213, research firm Autodata says. The 5-series average incentive was $6,831; the E class was $7,219.
The price reduction marks a shift in strategy for Cadillac President Johan de Nysschen, who has been mapping out a broad strategy to elevate Cadillac since taking over the brand on Aug. 1 from Infiniti.
Asked in a September interview whether Cadillac would cut prices to avoid alienating loyal buyers, de Nysschen said flatly: "That's not going to happen."
De Nysschen has said that Cadillac must command luxury prices and reduce its reliance on incentives to raise resale values and ultimately rehabilitate the brand's image. He believes Cadillac's vehicles compare favorably to BMW, Mercedes and Audi -- a view that many auto critics share -- and should be priced accordingly.
Even before his arrival, Cadillac’s rationale for the price increase was that the smaller ATS, which entered the lineup in 2012, serves as Cadillac's entry-level model, giving the CTS higher positioning. The latest CTS was made larger, with better performance and more features, to compete directly with the 5 series, E class, Audi A6 and other midsize luxury models.
"Either you have to bring your volume aspirations into alignment with reality and accept that you will sell fewer cars," de Nysschen said in the interview. "Or you have to drop the price and continue to transact at the prices where you were historically.
"I think the logical conclusion is that it's better to build off a very solid base in terms of [product] credibility, charge a fair price for the car and realize you have to wait until the volume comes," he said.
Cadillac spokesman David Caldwell confirmed the price reductions. He said they represent a response to dealer feedback and shopping patterns.
"We're taking what we've seen are the more desirable optional features for customers and making them more readily available," Caldwell said. "Once a car has been on the market for a while, it's not unusual to look at the customer behavior and try to optimize for it."
The new prices knock $3,000 off of trim levels near the top of the CTS range. For example, the sticker on a Premium Collection 3.6-liter V-6 is now $62,765, down from $65,767, including the shipping. The price on the trim level below it, the Performance Collection, also goes down $3,000, to $58,365.
Prices on models with the 2.0-liter, four-cylinder turbocharged engine have been reduced by $2,000. The Performance Collection trim package is now $56,665.
Cadillac also has made some more popular optional features standard. For example, an UltraView sunroof with navigation and a higher-quality Bose sound system -- options before, cost $2,155 -- will now come standard on Luxury models, one step up from the base trim level.
The car's base price of $46,340, including destination fee, did not change. Neither did that of the priciest CTS: the vSport with a twin-turbo 3.6-liter engine, which remains $71,880.
Cadillac said it would credit dealers' accounts to adjust for the price changes on cars in their inventory. It's now shipping new window labels to stores, the memo says.
The memo reads: The new pricing "provides a more compelling price point for our returning CTS loyalists when moving up into a new, more sophisticated 2015 CTS."