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For GM, Help Is on the Way at Cadillac

Tickers in this article: F TM GM

DETROIT ( TheStreet) - Cadillac, a languishing brand at which first-half sales fell by 18%, is about to get what it badly needs --- new cars.

The most important of them, the Cadillac ATS compact luxury sedan, is poised for its advertising debut a week from Friday, during the July 27 opening ceremonies of the 2012 Olympics. The ads will proclaim that the car's superior handling can meet the challenges posed by extreme driving conditions around the world, and will suggest they can also meet the challenges posed by luxury brands from Germany.

For this task, expensive Olympic first night advertising definitely seems the way to go because Cadillac needs a jolt.

June was Cadillac's best month of 2012, with sales up 12%. But for the first half of the year, sales of every single Cadillac vehicle declined, and the brand's market share fell by 25%. Overall GM (GM) sales during the first half climbed 4.3%, while the automaker's market share fell almost two percentage points to 18.1%.

But help is on the way as GM seeks to rebuild Cadillac, its effort led by two new vehicles that are or will soon be showing up in dealerships. The new XTS sedan went on sale in June and, while just 753 vehicles sold, they sold rapidly. Edmunds.com said new cars sat in dealerships for just seven days, compared with an industry average of 55 days. Now comes the time for ATS, unveiled at the 2012 Detroit Auto Show.

Polk Analyst Tom Libby said the landscape for Cadillac is improving, although the competition from BMW and Mercedes Benz is tough and, at least in the short-term, probably insurmountable.

"The addition of both the ATS and XTS to the Cadillac car lineup marks a significant milestone in the evolution of the make," Libby wrote, in a recent blog. "For the first time in many years -- maybe forever -- Cadillac will simultaneously offer three competitive cars in the three core luxury car categories: compact, midsize and large.

"XTS volume will increase as availability improves, though the volume potential at the higher end of the luxury space is limited," Libby said. ATS, meanwhile, is "competing in the highest-volume luxury segment, luxury compact car (against) the segment-leading BMW 3-Series and Mercedes-Benz C-Class."

Karl Brauer, CEO of Total Car Score.com, recently drove the new ATS, and said that "GM has cracked the code on how to do this stuff.

"It might not quite be the 3-Series in pure driving dynamics, but we're talking shades of grey there," he said. "The difference is small enough that most people wouldn't even notice it. ATS is a hugely important car for GM, (whose) attitude is 'we're taking on the world,' and I think it's going to work."