NEW YORK (TheStreet) -- If any doubt remained that General Motors' (GM) top brass is committed to renovating its Cadillac luxury brand -- with all the difficulty and cost that will entail -- it vanished this week with the layoffs of 450 workers at its Cadillac plant in Lansing, Mich.
The layoff reduces to two shifts from one the work force building Cadillac ATS and CTS models in a move to shrink the output of those models, whose inventory has been swollen due to slow sales. With less output, GM's revenue surely will take a hit, but the longer-term objective is to strengthen Cadillac’s pricing by reducing the discounts that once were GM's preferred method for shrinking inventory.
It's reasonable to assume that turning Cadillac back into the prestige product it once was, as well as transforming it into a true global brand, could do wonders for the ho-hum performance of GM's common stock, which is down nearly 20% for the year to date.
GM's latest strategy to strengthen Cadillac coincides with the recent arrival of Johan De Nysschen, a former Audi and Infiniti executive, who is bluntly and openly advocating for greater production discipline by GM so as to avoid oversupply of a product whose luxury status “must be measured by its relative scarcity."
"It has everything to do with creating an awesome car company," said De Nysschen, GM’s global head of Cadillac, in a post on Facebook. "We must develop corporate processes, policies, mindsets, behaviors, attitudes, which are right sized for Cadillac, focusing on and responding to what it takes to win in the premium segment."
DeNysschen also raised hackles in Detroit by announcing the opening of a Cadillac brand office in Manhattan’s SoHo neighborhood. He said he wanted his marketing staff in touch with high-end luxury products and services of all varieties.
Must Read: 12 Stocks Warren Buffett Loves in 2014
A wide array of reviewers have praised technical improvements in recent Cadillac models, some equating them to the best built by BMW, Audi and Lexus. But the nagging issue of over-supply has dogged GM for years, along with the big discounts needed to clear dealer lots and create room for new supply. The discounts cheapen brand image, as well as undermine the residual value of used cars.
After De Nysschen was hired last summer he invited the nation’s Cadillac dealers to a meeting in Las Vegas to explain his new approach, which was bound to reduce the number of cars that dealers would have to sell. To show that GM was aligned behind him, he was flanked at the meeting by Mary Barra, GM's chief executive, and Dan Ammann, the company’s president.
During most of Barra's 11-month tenure as CEO, GM shares have been stalled in the low to mid-$30 range, underperforming the broader market as well as rivals Ford Motor (F) and Toyota (TM) . She will face contract negotiations next year for a new labor contract with the United Auto Workers union, which undoubtedly was unsettled by the layoffs in Lansing.
De Nysschen, having been intimately involved with the rise of the Audi brand in the U.S., realizes that employment security for auto workers -- as well as for executives -- relies on financial stability, something that eluded GM for a number of years prior to its 2009 bankruptcy and reorganization.
Must Read: Warren Buffett's Top 10 Dividend Stocks
TheStreet Ratings team rates GENERAL MOTORS CO as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:
"We rate GENERAL MOTORS CO (GM) a BUY. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures and growth in earnings per share. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself."
You can view the full analysis from the report here: GM Ratings Report