Cadillac Motor Car Division’s Quality Management

Introduction

Cadillac Motor Car Division is part of the General Motors Company, a firm that designs, produces, and sells motor cars and car parts all over the globe. Cadillac is focused on the marketing and production of luxury cars for sale in the United States, Europe, China, and other countries. The brand has an extensive history of success and is not in the middle of a resurgence process, which is aimed at advancing its position in the luxury car market and expanding its global sales. Part of this process is rigorous quality management that targets all aspects of the company’s operations in order to achieve and maintain the industry standards set by its competitors.

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Brand History

Cadillac was founded by Henry Leland in 1902 and was named after Antoine de la Mothe Cadillac, the founder of Detroit (Plaza Cadillac, n.d.). Cadillac was one of the first automotive brands in the world and quickly gained a worldwide appreciation for its innovative approach to design and manufacturing. For instance, “In 1910, Cadillac became the first company to offer a passenger car with a fully enclosed cabin, a significant change from the vehicles of the time” (Plaza Cadillac, n.d., para. 2). In 1912, Cadillac designed the first car to feature an electronic self-starter, ignition, and lighting, which marked the abolition of the crank starter (Plaza Cadillac, n.d.). Apart from being an innovation in car engineering that brought forward the entire industry, this feature also allowed women to drive, as no physical force was now required to start the car (Plazza Cadillac, n.d.) Throughout its history, the brand continued to introduce valuable innovations, such as expanding the color range and employing designers to work on the look of the vehicles, as well as adding new engine size options (Plazza Cadillac, n.d.).

In 1909, Cadillac was acquired by General Motors and soon proved to be one of the best investments of the firm: Zimmerman (2011) writes that “Cadillac continued to contribute heavily to the profits of General Motors for many years as well as serving as a front of technical expertise, particularly manufacturing expertise, during critical points in GM’s history” (p. 155). The company continued to introduce innovations throughout the 20th century, even though the production scale remained relatively small after World War II (Plazza Cadillac, n.d.). At the end of the century, however, the company decided to expand after what was called “an identity crisis” (Meredith, 1999, para. 1). The new vision proposed by the firm was to incorporate innovative functionality and design (Meredith, 1999). This approach suited the target audience of the brand, which values quality and innovation as much as the overall look of the vehicle, thus helping Cadillac to grow throughout the first decades of the 21st century.

Cadillac Today

Today, Cadillac Motor Car Division is classified as a motor vehicle dealer (SIC Code 5511) and a new car dealer (NAICS Code 441110). Cadillac is working in the automotive industry with a strong focus on luxury car production and distribution. In 2017, Cadillac is among the five biggest luxury car companies in the world. It has a large and growing customer base in the United States, Europe, and Asia (Caldwell, 2016). In 2014-2016, the company was working to improve its brand image and production capabilities (Lienert & Klayman, 2015), which resulted in a stable increase in sales and helped to expand its presence in China and Europe (Caldwell, 2016).

Cadillac operates six plants in different parts of the world, including China, US, and Canada, in order to increase its global coverage, which is why it is crucial for the company to have a unified quality management controls in place. Historically, Cadillac’s turnaround was based on its expertise in manufacturing, quality, and innovation (Zimmerman, 2011, p. 155). In the 21st century, this approach allowed the company to emerge and prosper, and “Cadillac’s ability to focus on the lucrative high-priced segment of the market was a direct outgrowth of the division’s reputation for quality” (Zimmerman, 2011, p. 155). Zimmerman (2011) explains that quality management was one of the major reasons for Cadillac’s successful resurfacing in automobile marketing. The author also shows how there are several key components to the company’s quality management, such as high-quality standards, the focus on in-process quality, and operational efficiency (Zimmerman, 2011).

Main Products

Cadillac produces a range of luxury cars with a variety of designs, including a coupe, sedan, crossover, and SUV. Its signature model is Cadillac Escalade, which is a full-size luxury SUV that first hit the market in 1999. It was one of the first luxury SUV models in the world, which gave it stable popularity over the years. Another signature product of Cadillac is its CTS model, a medium-sized luxury sedan that was introduced in 2002. Among the recent models, CT6 and XT5 are both very promising. CT6 is a full-sized sedan, and XT5 is a medium-sized crossover SUV, suitable both for the city and suburban driving. Both models were first introduced in 2016 and incited a relatively high interest in customers all over the world.

Competitors

Due to Cadillac’s focus on a relatively small high-priced segment of the automobile market, the company has fewer competitors than regular car producers, such as Ford or Honda. Nevertheless, the competition in the luxurious automobile sector is still high and remains one of the driving forces bend company’s innovations and business strategies. In order to find the major competitors of the brand, I performed a literature review of the industry news articles published over the past five years. Many of the items made comparisons between Cadillac and other luxury car brands by their popularity, sales, or latest models, which gave me the information I needed to outline the main competitors of Cadillac. Overall, the articles on luxury cars mentioned five brands, including BMW, Mercedes-Benz, Audi, Cadillac, and Lexus. Then, I researched the 2016 global sales results for these companies in order to choose the two largest competitors of Cadillac that could be used later in this paper.

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With regard to quality management practices and standards, I decided to focus on BMW and Mercedes-Benz, as their range of luxury models is similar in size to that of Cadillac, and they have similar global coverage. Both companies have a stable position in the market. However, in recent years, BMW’s sales in the United States have been declining gradually: for instance, in December 2016 the company’s sales totaled 32 835 vehicles, compared to 34 625 vehicles sold in December 2015 (BMW Group, 2017). The annual sales of BMW passenger cars decreased by 14.5 percent in comparison to the previous year (BMW Group, 2017). Mercedes-Benz USA (2017), on the other hand, reports December 2016 sales of 37 057 units, whereas the annual sales showed a best year ever quantity of 380 752, achieving an improvement of 0.1% compared to the previous year. Out of the three companies, Cadillac achieved the greatest improvement in 2016, boosting its annual sales in the United States by 14.5% percent (Caldwell, 2016).

The global sales of the company grew by 32.8 % in November 2016, marking six consecutive months of double-digit growth (Caldwell, 2016). The sales of the company’s signature model Escalade in the United States have grown by 24% (Caldwell, 2016). The overall sales of Cadillac remain significantly smaller in scale than the competitors’; however, the higher growth of sales shows Cadillac’s future potential to reach the same sales volumes. As of 2015, one of the company’s weaknesses was its inability to satisfy the U.S. customers’ demand for the products due to the insufficient scale of production (Lienert & Klayman, 2015). Thus, in order to reach a higher sales volume, it is necessary for Cadillac to increase its productivity and the number of manufacturing sites. Quality management is crucial for achieving this goal, as the company has to make sure that the increase in quantities produced will not impair the quality of individual products, as well as that the new sites adhere to the current quality standards.

Quality Management in the Luxury Car Market

For the majority of customers that have a strong practical interest in luxury car models, quality is a decisive factor in the choice of the car brand. One of the reasons for this is that a significant share of customers in these market segments are corporate clients that purchase luxury cars as their executive vehicles and are therefore driven by design, brand image, and reliability. Individual clients have similar priorities, but they are also more interested in functionality and innovation. Overall, the quality management of car producers working in the luxury cars segment is mainly focused on four areas: design quality, production quality, perceived quality, and sustainability of operations.

Design Quality

Before the new model is even conceptualized, there is an extensive design development process, the primary aim of which is to ensure the design quality of the future car. Goicoechea and Fenollera (2012) explain the process of quality management in the automotive industry, including design quality. The authors state that there are multiple steps that help to achieve a high quality of the end model, which are primarily centered around design validation and improvement (Goicoechea and Fenollera, 2012). The average development process includes an extensive planning process, which takes around 3 years for new models and 1.5 years for restyling; during this period, each vehicle component is designed, including the car’s “geometry, functionality, technical characteristics, as well as the interrelation and interferences among them” (Goicoechea and Fenollera, 2012, p. 623).

In order to achieve a high quality of the design, the developers sometimes include vehicle parts suppliers in their working team to ensure that all components work together well (Goicoechea and Fenollera, 2012, p. 624). The design is then tested and validated multiple times, proving its theoretical reliability and lack of obstacles for production (Goicoechea and Fenollera, 2012). Due to the secrecy surrounding new model development, it was difficult to find information on how exactly BMW and Mercedes-Benz achieve design quality. However, it is clear that BMW is devoted to promoting quality designs, especially in the case of newly introduced vehicles. The quality control at the development stage is organized in three separate steps. First, launch control is performed, which offers a practical possibility to test the designs by building pre-series cars (BMW South Africa, n.d.). Then, change control takes place; it ensures that the parts included in the new design are up-to-date, available, and reliable (BMW South Africa, n.d.). Finally, the methodology stage “assures the quality of the vehicle build of Pre-Series cars, and drives the problem-solving process up to the Start of Production” (BMW South Africa, n.d., para. 11).

Production Quality

After the design has been validated, it is necessary to ensure that the manufacturing process is capable of fulfilling the quality standards set by the company and the competitors general. Another standard that the production has to adhere to is the industry-standard ISO 9001:2000. Goicoechea and Fenollera (2012) argue that the implementation of this standard has helped the companies to optimize the process of production quality management: “This standard requires the establishment of a method so that the PRP is measured up by means of specific milestones, including the corresponding management analysis and revision” (p. 623).

One of the crucial steps in automobile production quality management is the validation of suppliers’ quality. This is due to the fact that modern car companies usually do not produce car parts (Goicoechea & Fenollera, 2012). Instead, they rely on suppliers to provide them with parts, which are then assembled in the plants. Therefore, supply chain quality management becomes the most important stage of production quality management, and the majority of car companies have certain requirements in place before they even consider working with a supplier. For instance, Mercedes-Benz Brazil (2016) outlines the process needed to validate the supplier’s quality. Among the key requirements are the supplier’s certification, recommendations from previous clients, high customer satisfaction, and the experience of the application of a proper problem-solving methodology (Mercedes-Benz Brazil, 2016). Mercedes-Benz also retains the right to perform an audit of the production process and to monitor it throughout the duration of the contract (Mercedes-Benz Brazil, 2016). These steps help the company to ensure the high quality of parts supplied, which is one of the key components of the desired end-product quality.

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Among other control techniques used in the production process, Statistical Process Control is one of the most widely used (Goicoechea & Fenollera, 2012). It involves the validation of processes by the quality standards applied to the end product (Goicoechea & Fenollera, 2012). Another quality control method is performance and process audit, which usually includes hiring an external company to assess the production and operations of the company (Goicoechea & Fenollera, 2012). Finally, the Lean Six Stigma approach is widely used to continuously improve the quality of the output of each process (Goicoechea & Fenollera, 2012). The implementation of this approach has been proven to reduce the number of product defects, eliminate the production waste, and minimize process variation, and these factors are especially beneficial to car manufacturers as they promote consistent product quality (Habidin & Yusof, 2013).

Sustainability

The growing concerns about the impact of the industry on the environment have led to the development of another area of quality control that the car manufacturing firms have to apply to their activities. Sustainability of production promotes waste elimination and the optimization of operations to minimize their impact on the environment. Among the key factors of sustainability in manufacturing is the management of solid waste and the reduction of energy usage and carbon emissions. Mercedez-Benz shows evidence of addressing these concerns through the management and improvement of its plants all over the globe. For instance, Mercedes-Benz South Africa (2012) writes, “At the MBSA Plant we regard the safety and health of all our employees and our environmental responsibility as the highest priority” (p. 3). Indeed, the 2012 report from Mercedes-Benz South Africa manufacturing plant in East London outlines the key steps to sustainability that are embedded in the production process.

The primary area that the plant addresses is the management of energy use, which is a huge contributor to the carbon footprint of the plant (Mercedes-Benz South Africa, 2012). The East London plant has joined the United Nations’ Industrial Energy Efficiency Project which focuses on the development and implementation of appropriate energy management systems and its optimization for the industry (Mercedes-Benz South Africa, 2012). Moreover, the internal projects, such as the installation of UBS Incinerator Catalytic Converter, optimization of the Chiller Plant, as well as other updates, has contributed to the overall reduction of energy consumption by 13.5% between 2007 and 2012 (Mercedes-Benz South Africa, 2012). A number of waste reduction initiatives were also undertaken, including the re-use of one-way packaging and obsolete Aluminium step plates (Mercedes-Benz South Africa, 2012). Overall, the plant’s sustainability report shows a stable reduction in carbon emissions and water consumption (Mercedes-Benz South Africa, 2012).

Competitive Priorities in the Luxury Car Market

There are several forces that affect the company’s competitive position in the luxury car market and therefore have to be addressed in order to sustain the competition. The quality of the product is one of the key factors that affect the customers’ choice of the luxury car brand. Other important factors are innovation, functionality, and the brand’s customer focus.

Quality

The quality of the product is crucial to the buyer. Luxury cars are perceived as reliable and, with a high cost of replacement parts, the customer is likely to choose a car that will not have any defects and will not require frequent visits to the repair shop. Therefore, improving the design and production quality is one of the main ways for the company to achieve competitive success: “Superior quality continues to be central to a manufacturing company’s success, and firms are constantly striving for a quality advantage over competition” (Narasimhan & Schoenherr, 2012, p. 1185). A growing body of research shows that the different components of quality management are also the sources of the production companies’ competitive advantage. For example, a study by Narasimhan and Schoenherr (2012) shows how supply chain management that focuses on the supplier’s expertise and validation ensures the high quality of the end product, thus resulting in competitive advantage (Narasimhan and Schoenherr, 2012).

Moreover, effective supply management also shapes the customers’ perception of the brand’s quality, thus allowing for growth in sales (Narasimhan and Schoenherr, 2012). Another aspect of quality management in the automobile industry that can become a source of competitive advantage is environmental sustainability. This is due to the fact that the optimization of the manufacturing processes also improves the quality of the end product, thus enhancing the brand’s perceived reliability (Narasimhan and Schoenherr, 2012). Furthermore, many customers perceive environmentally responsible companies as more efficient and reliable (Narasimhan and Schoenherr, 2012), which can also be a decisive factor affecting their choice of brand. Another study by Park, Fujimoto, and Hong (2012) shows how the increase in the efficiency of the product design process can also become a source of competitive advantage, as it results in higher reliability of the product.

Innovation

Another significant aspect of the car company’s competitive power is its capability for producing and managing innovation. As noted above, innovation was one of the reasons for Cadillac’s success, both in the 20th century and in recent years. Today, innovations are crucial for the firm working in the car industry to sustain the competition. For instance, a study by Wyman (2015) shows that most of the executives of large car manufacturing companies perceive innovation as “one of the most important success factors to maintaining a strong competitive position in the auto market” (p. 4). Moreover, innovation also drives the car industry forward, as it has the potential to solve many problems that the global automotive industry faces (Wyman, 2015). In the luxury car market, innovations introduced by the company shape the customer’s perception of the brand (Wyman, 2015). Innovations can have different objectives; in the case with luxury car brands, innovations are focused on improving the safety and comfort of the vehicle, which is why most of the changes produced in this segment of the industry are not partly embedded in the basic model but included as extras. For instance, Wyman (2015) states that in the BMW 7 series, the total number of extras available rose from 14 options in 1986 to 92 options in 2006.

Customer Focus

Therefore, the focus on the client’s needs is also an essential component of the car company’s competitive advantage. Particularly in the luxury car industry, brands are often judged by their appreciation of the target customers’ desires with regards to the functionality of the car and its design features. Innovations should also be customer- rather than performance-focused. For instance, a typical buyer of Cadillac CTS is more likely to appreciate the improved exterior than the expansion of the range of engine options available. Moreover, it is important for a luxury car company to acknowledge the customer’s expectation with regards to service. The sale of cars occurs through high-end salons where the appointments are usually scheduled so that each client could receive the undivided attention of the sales managers.

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Conclusion

Overall, working in the luxury car industry requires Cadillac as well as its competitors to have a thorough approach to quality management. Many aspects of quality control are key to the company’s competitive position on the market as they promote higher efficiency and improved product quality, which generates a significant competitive advantage for the firm. However, there are also other challenges that are not related to quality but can still affect the competitive landscape of the company operating in this industry segment. A successful development strategy, therefore, should be focused on all of the aspects that can help the company to achieve a competitive advantage, thus achieving higher sales and increased global presence.

References

BMW Group. (2017). BMW Group U.S. reports December and 2016 sales. BMW Group Press Club USA. Web.

BMW South Africa. (n.d.). Quality. BMW South Africa Plant Rosslyn. Web.

Caldwell, D. (2016). Cadillac global sales increase 32.8% as brand reaches key growth milestones. Cadillac Pressroom. Web.

Goicoechea, I., & Fenollera, M. (2012). Quality management in the automotive industry. In B. Katalinic (Ed.), DAAAM International Scientific Book 2012, (pp. 619-632). Vienna, Austria: DAAAM International.

Habidin, N. F., & Yusof, S. M. (2013). Critical success factors of Lean Six Sigma for the Malaysian automotive industry. International Journal of Lean Six Sigma, 4(1), 60-82.

Lienert, P., & Klayman, B. (2015). Exclusive: GM’s Barra faces roadblocks in rebuilding Cadillac brand. Reuters US. Web.

Mercedes-Benz Brazil. (2016). Customer-specific requirements Mercedes Benz do Brasil Ltda. Web.

Mercedes-Benz South Africa (2012). MBSA East London plant sustainability report. Web.

Mercedes-Benz USA. (2014). Mercedes-Benz USA reports best year ever with 2016 sales of 380,752 units. PR Newswire. Web.

Meredith, R. (1999). Cadillac is redesigning its image before its retooled cars appear. The New York Times. Web.

Narasimhan, R., & Schoenherr, T. (2012). The effects of integrated supply management practices and environmental management practices on relative competitive quality advantage. International Journal of Production Research, 50(4), 1185-1201.

Park, Y., Fujimoto, T., & Hong, P. (2012). Product architecture, organizational capabilities and IT integration for competitive advantage. International Journal of Information Management, 32(5), 479–488.

Plaza Cadillac. (n.d.) History of Cadillac. Web.

Wyman, O. (2015). A comprehensive study on innovation in the automotive industry. Web.

Zimmerman, F. (2011). The Turnaround Experience: Real World Lessons in Revitalizing Corporations and Organizations. Minnetonka, MN: F & J Zimmerman Co.

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