While Cadillac is working on a new flagship, rear-wheel drive sedan, it's keeping an eye on the opposite end of the luxury-car market. The compact Audi A3 and Mercedes-Benz CLA-Class are proving quite popular in the U.S., leading Cadillac to consider a small car of its own that would slot below the ATS in its lineup. However, the Caddy would have one thing the entry-level Germans don't: rear-wheel drive.

Speaking to Car and Driver, Cadillac marketing chief Uwe Ellinghaus said General Motors Company's [NYSE:GM] luxury brand is mulling a sub-ATS sedan, and that if it does get built, it will definitely feature rear-wheel drive as stabdard. That would negatively affect interior space and price, but Cadillac believes the superior driving dynamics and styling offered by rear-drive will be worth it.

After all, Cadillac knows how badly a front-wheel-drive compact luxury car can go. The Chevy Cavalier-based Cimarron did damage to the brand's reputation that took decades to remedy. Yet times have changed since the Cimarron disgraced showrooms in the 1980s. People shopping for small luxury cars are often buying the badge more than anything else, and so are less interested in driving dynamics.

BMW's launch of front-wheel-drive models like the upcoming 2-Series Active Tourer was justified in part by a survey of 1-Series owners, 80 percent of whom thought their cars had front-wheel drive. Ellinghaus countered that customers will be attracted to a rear-wheel-drive sedan's proportions and handling, even if they don't know why.

To make those proportions fit a smaller chassis, Cadillac may actually stretch the ATS to give its little brother room. It may also bill the sub-ATS sedan as a "two-plus-two," retaining four doors but openly acknowledging that the rear seats won't be suitable for daily use.

Don't expect this new model to arrive for some time, though. Cadillac is overhauling its lineup for 2015 with a slew of debuts, including a redesigned SRX crossover and the LTS flagship sedan. Those models will obviously take priority over new projects.


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