General Motors Co proved with the Chevrolet Cruze it can build a top-selling compact car, cracking a market long dominated by Japanese brands.

Now the No.1 U.S. automaker is targeting the entrenched German luxury brands with a more nimble compact Cadillac.

The 2013 ATS is central to GM chief executive Dan Akerson's mission to refashion Cadillac into a global luxury brand by winning over younger buyers with a sportier image.

From the start, GM took aim at BMW's 3-Series, the dominant car in this segment along with the Mercedes-Benz C-Class. Luxury compacts make up two-thirds of the luxury car market in the United States, according to Autodata.

GM has failed in this segment before, however. In the early 1980s, GM launched the Cadillac Cimarron, which Time magazine in 2007 called one of the 50-worst cars ever built.

We need to face one fact, the cars that have achieved consistent success in the segment have been European cars and then more specifically, they've been German, said Don Butler, head of Cadillac marketing at an event to showcase the 2013 ATS on Sunday, ahead of the Detroit auto show this week.

Cutting weight from the vehicle was key to making the ATS competitive. At less than 3,400 pounds, the ATS is the lightest Cadillac yet.

Engineers fashioned the car with an aluminum hood and natural-fiber door trim panels, among other materials, to cut weight and improve handling.

GM's North American president, Mark Reuss, said GM could apply some of these techniques to other cars in GM's lineup.

NO LONGER THE GEEZERMOBILE

Last year saw a reordering of the luxury car market in the United States, providing an opportunity for Cadillac to break into the market in 2012.

Toyota Motor Corp's <7203.T> Lexus brand, hurt by inventory constraints after the March 11 earthquake in Japan, lost its No.1 luxury brand ranking in the U.S. market to BMW.

Ludwig Willisch, head of BMW's North American operations, said he was not overly concerned about the ATS globally.

I don't think it will ever play a sufficient role in the rest of the world, but in this market, yes, he told reporters Sunday.

Brand image remains perhaps the most crucial in the luxury car market, where it can take a long time and a lot of money to overhaul consumer perceptions, analysts said.

The average age for Cadillac drivers was around 59 years old in 2011, according to CNW Research. That's a decade older than BMW and five years older than Audi , but on par with Mercedes-Benz .

Still, the average age of Cadillac drivers has fallen from about 63 in 1995. The Escalade SUV's reception from hip-hop artists and the success of the CTS has helped upend Cadillac's image as a geezermobile, said Art Spinella, president of market researcher CNW.

It's going to take them a couple of years, Spinella said of the ATS. You have to knock over these dominoes one at a time. It's not like they all fall over all at once.

The ATS, which tested at the demanding Nuerburgring racetrack in Germany, will be built on a new rear-wheel drive platform, but will also come in an all-wheel drive version.

GM will build a diesel version of the car, which will go on sale in the late summer. The company did not disclose pricing.

GM will make the car at its Lansing Grand River assembly plant in Michigan.

(Reporting by Deepa Seetharaman and Ben Klayman; additional reporting by Bernie Woodall; Editing by Bernard Orr and Matt Driskill)

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