Cadillac Kills Crucial Diesel Engine for Europe
March 26, 2009
By Bill Visnic
General Motors Corp.'s Cadillac division, long ambitious to expand its brand in Europe, has canceled a long-needed diesel engine that was earmarked to power Cadillacs sold in that market.
The loss of the diesel engine -- currently a virtual requirement to successfully compete in Europe, particularly in premium-vehicle segments -- is another blow to Cadillac's European aspirations and is certain to cause a serious setback and realignment of Cadillac's strategy. Or even an outright surrender in Europe.
GM and Cadillac sources confirm the diesel for Europe has been canceled, but division spokesperson Joann Krell said the engine's official status, as with many diesel engine programs recently shelved, is "indefinitely delayed."
The 2.9-liter V6 turbodiesel was developed with and was to be manufactured by Italian diesel-engine expert VM Motori S.p.A., of which GM currently owns 50 percent. A source said design and development of the engine was complete.
The move means GM will continue to lack a diesel engine for its rear- or all-wheel-drive models, including the Cadillac CTS and Cadillac STS, that comprise the preponderance of its model range. The only Cadillac in Europe currently offering a diesel-engine option is the front-wheel-drive BLS, a model that to date has been an undeniably dismal seller.
Canceling the V6 diesel effectively shuts the door on Cadillac's potential to improve market share -- and brand perception -- in Europe, because according to the most recent figures from diesel-component supplier Robert Bosch Corp., 54 percent of all light vehicles sold in Western Europe last year were diesel-powered. And diesel penetration rates in many premium segments are markedly higher still.
Another Shoe Drops
GM's aspirations for Cadillac are almost certain to be further derailed by last week's announcement that GM's contracted European importer and distributor for Cadillac, Netherlands-based Frits Kroymans, filed for the equivalent of bankruptcy protection. Kroymans also distributes Hummer and the Chevrolet Corvette.
Not that the GM-Kroymans alliance had done much to prime Cadillac's sales pump: through Kroymans, Cadillac sold just 4,556 vehicles in Europe for all of 2008 (a 4.3 percent decline compared with 2007) -- and just 619 units in the fourth quarter.
Kroymans assumed the role of Cadillac importer and retailer for most Western European nations in 2003 with ambitions to sell 20,000 units by 2010, reported Automotive News
Europe.
That is almost five times the number of Cadillacs sold in Europe last year.
Cadillac's Krell said the companies are scheduled to part ways in January 2011, although original reports indicated the relationship would terminate at the end of this year.
But with Kroymans' new revelation of its financial straits, it's "a bit unclear as to how it will work out," Krell told AutoObserver, adding that it is possible Kroymans' situation could leave Cadillac without a distribution channel in Europe much sooner than the two companies' scheduled separation.
"We're hoping that's not the case," said Krell.
Cadillac SNAFU for Europe?
"We did have high hopes for the 2.9-liter [diesel engine]," said Krell. All auto companies hoping to expand in Europe and globally are "taking things off the table, tightening up," she added -- even the region's dominant prestige-market players such as Audi AG and BMW AG.
She admits, however, that to outsiders, the combination of canceling the diesel and the Kroymans situation makes Cadillac's European potential look bleak. But she says Cadillac currently has no plans to vacate -- despite, even, what might be assumed as pressure to do so because of GM's tenuous financial position and recent reliance on billions of dollars in federal loans to continue daily operations.
"You shouldn't take this as Cadillac is completely out of Europe," Krell said. "It won't be the same emphasis. It's tough everywhere -- priorities have changed."
Leaving Europe, she insists, is "not currently part of the [Cadillac] strategy. We will remain where luxury sales are strong," but do so "profitably and sustainably."
GM Director of News Relations Tom Wilkinson said, meanwhile, that although the VM Motori-made diesel for Cadillac has been shelved, nothing should be read into the current relationship between GM and VM Motori -- he says GM is not seeking to sell any portion of its 50 percent stake in the engine maker (Penske Corp. retains the other 50 percent).
"We have no intention of selling our equity stake in VM," Wilkinson said. "It is still a strategic center for diesel development/engineering and expertise, even though the Cadillac diesel was canceled."
Photos by GM
1 - The Cadillac CTS, photographed in Paris with the Eiffel Tower in the background, would have been a likely candidate for General Motors' new, now "indefinitely delayed" diesel engine.
2 - The Saab-based Cadillac BLS has done little to lift the fortunes of GM's luxury marque in Europe.
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