CHICAGO - General Motors Corp.'s Cadillac luxury division is focusing its marketing efforts on retail sales at the expense of leasing, General Manager Mark McNabb reveals.

“We basically got out of leasing last September-October when GMAC (LLC) pulled out,” he says in an interview while in town to update the Midwest Automotive Media Assn. on the state of Cadillac.

“We only have about 6% to 8% lease penetration now, so we lost a lot of share in that market. We gained some share on the retail side but are still down overall.”

The move appears to be paying off on the low end of the market but negatively affecting the top of Cadillac's model line, where sales of the STS fell 6.4% in February from January on a daily rate basis.

“CTS is doing well,” McNabb says. “Rather than leasing we went to (low-interest rate) programs and CTS sales were up in February.” Ward's data shows sales rose 3.3% from January levels.

Cadillac is using cash discounts, reportedly up to $4,000, to encourage those who are turning in leases to purchase their next vehicle.

“We're…doing okay,” McNabb says, declining to detail the size of the discounts being offered. “CTS picked up (two points) in share (of the luxury segment) in February.”

While Cadillac is losing business by abandoning leasing, McNabb says staying in that market will catch up to the luxury brand's rivals.

“Those still big into leasing are going to pay. It's going to cost them a lot to get the cars off their books. When cars come back in off lease, they still have to be sold.”

McNabb is unable to pinpoint the number of returning lease customers who have opted to purchase their next Cadillac, but says, “It's a bunch. We started offering cash back late last year to get those coming off lease to buy and hope to know how many did by the end of March.”

McNabb says the luxury-vehicle segment is down 36%-39% so far this year, with Cadillac sales off about 40%.

“The luxury segment feels the pinch just like the rest of the market,” he says.

Meanwhile, McNabb says the overall market decline is not affecting plans to launch the CTS wagon, and a 2-door CTS coupe now remains firmly slated for 2010, having been delayed earlier from a mid-2009 launch.

“The CTS wagon is on schedule and production starts May 4,” he says. “The coupe was planned for next year and those plans are unchanged, too. It's time to bolster our offerings.”

He declines to forecast volumes for the new models but predicts the coupe will be a bigger seller than the wagon.

“We have a family of CTS vehicles coming and plan a steady cadence of new product to keep interest up in our vehicles and to keep our name out there,” McNabb adds. “We intend to keep the CTS family fresh and not walk away from it. There's still pressure on the luxury market, but we intend to pick up market share, because even in a tough market, new vehicles tend to do well.

“Some fear SUVs and want better car-like ride and gas mileage, so the time is right for consumers to rediscover the wagon.”

McNabb also says he has had no second thoughts about offering the high-performance CTS-V, powered by a 556-hp V-8, at a time when some people fear gas prices could skyrocket again.

“(CTS-V) buyers have $25,000 to $30,000 higher incomes than we expected, and the average age is 10 to 12 years lower,” he says. “There are still people who want to buy 556 hp and still 556-hp cars for people who want the best performance they can get.”