Cadillac has a credibility problem. It’s not that the automaker has released bad information, and it’s certainly not due to the impressive products the luxury brand has been cranking out in recent years. Instead, its credibility issue is in regards to pricing.

Luxury brands are supposed to be exclusive and unattainable by the masses, which is part of what makes them desirable. Cadillac, while more expensive than other GM brands, still is priced thousands below equivalent sedans from German automakers.

As Automotive News (subscription required) points out, a base Cadillac CTS sedan can be had for some $8,000 less than the least expensive BMW 5 Series sedan, which impacts both Cadillac’s profits and its prestige as a premium brand.

Don Butler, Cadillac’s vice president of marketing, explains, “You can expect that as we develop products that are targeted to go after the best in the segment, that from a pricing standpoint they're going to be very similar.”

Similar, however, does not mean identical, and Butler sees Cadillac as maintaining something of a price advantage over German competitors. If consumers see the quality as on par, that could represent a significant selling advantage for Cadillac.

The new ATS is perhaps the best current example of Cadillac’s new strategy. By most accounts (including ours), the ATS represents a legitimate challenger to the BMW 3 Series, yet the price gap between base models is just $3,405.

As a world class brand, Butler sees Cadillac as aiding both GM’s credibility and its profitability. One question remains, though: how high can Cadillac raise its pricing before it begins to alienate current owners and new customers alike?