The ATS was supposed to herald Cadillac's return to luxury relevance when it went on sale nearly four years ago.
The compact sedan was going to be the Cadillac to "finally challenge the German cars at their own game and win," then-GM North America President and current product chief Mark Reuss said at the car's January 2012 unveiling. Instead, it has become Cadillac's problem child. Even in a cold sedan market, the ATS has lagged behind compact luxury rivals -- its market share has declined every year since 2013.
A big part of the problem: Resale values have fallen steadily too, making it harder and more expensive for Cadillac to offer a competitive lease, crucial to success in the luxury market.
Even with bigger incentives that run higher than the segment average, the price of the ATS remains higher than the point "where consumers feel comfortable taking a chance on a Cadillac as opposed to the well-established luxury competitors," says Patrick Min, a senior industry analyst at ALG, a research company that monitors and projects vehicle values.
Now, Cadillac is trying to breathe new life into the ATS through a series of price and trim-package adjustments for the 2017 model year, which rolls out this summer. In short, ATS buyers will get a couple thousand dollars more value for their money than they did before.
Prices will be reduced between $650 and $1,100, depending on the trim level. And each model will get more content than it did before. For example, Cadillac is eliminating the base 2.5-liter four-cylinder engine, leaving the 2.0-liter turbocharged four-banger as the standard engine, and the 3.6-liter V-6 as the top engine. Starting with the '17 model year, buyers of a 2.0-liter turbo with some popular add-ons, such as a Bose surround-sound audio system, will pay about the same price as the 2.5-liter sedan with those same features cost in the '16 model year.
The goal is to give customers more value without resorting to the sort of fire-sale incentives that have hurt the ATS in the past, says Cadillac's global product planning director, Hampden Tener. It also spotlights the ATS' 2.0-liter engine, which is rated at 272 hp, more powerful than the 2.0-liter turbos offered in the BMW 328i and Mercedes C class.
"We want to emphasize the 2.0-liter turbo and the car's features while attacking the market on the product side, rather than using increased incentives," he told Automotive News.
Making the 2.0-liter turbo the standard engine boosts the ATS' base price by about $1,500, to $35,590 including shipping. That's above the base price of the 3 series. The 2.5-liter accounted for more than 20 percent of sales.
But Tener believes that dangling greater value at each trim level will spur demand. And reducing the number of model and engine configurations to seven, from 16, will make it easier for dealers to stock the most popular combinations.
The ATS' sales woes in part reflect a four-year hangover from a poor launch strategy. Analysts and dealers say Cadillac priced the cars too high and overproduced them in the first two years. Cadillac President Johan de Nysschen and his team have been struggling to right the ATS ever since, including dramatically reducing inventories and cutting back on incentives.
Ed Pobur, general manager at Cadillac of Novi in suburban Detroit, says it has been tough to condition buyers to a higher lease price than they had seen a year or two earlier, when Cadillac and its dealers were desperately trying to purge inventory that routinely exceeded a 150-day supply. The ATS had a 100-day supply as of June 1.
"We've trained the customers to expect leases in the $300s or even the $200s because of the discounting that went on in the last three or four years," he says. "It's tough to move a customer back up into the $400s."
ATS sales fell 23 percent this year through May, to 7,884. That shrank its market share in the compact luxury segment to 4.5 percent, from 4.9 percent, according to the Automotive News Data Center.
Registration data show that the shoppers tend to come from mainstream brands, rather than the German luxury marques that Cadillac has targeted. In the first quarter, the top three brands from which new ATS buyers migrated were Chevrolet, Ford and GMC, according to Polk data provided by IHS Automotive.
Ed Williamson, owner of Williamson Cadillac-Buick-GMC in Miami, says that the ATS remains "a conquest car." But because buyers generally come from lower-priced brands such as Honda or Ford, they "tend to be the most price-sensitive" of his customers.