DETROIT (Reuters) - The head of General Motors Co's GM.N Cadillac luxury division said on Thursday the brand will shrink its lineup of sedans and expand its offerings of sport utility vehicles and hybrid and electric vehicles in response to market shifts.

Cadillac President Johan de Nysschen speaks to reporters during Auto China 2016 auto show in Beijing April 25, 2016. REUTERS/Kim Kyung-Hoon

Expanding Cadillac’s global sales is central to GM’s overall profit strategy, and Cadillac has reported a 27 percent increase in worldwide sales through the first half of the year.

However, in the United States, now the brand’s second largest market behind China, Cadillac sales are down 1.6 percent and combined sales of the brand’s four sedan models have plummeted 16.3 percent through the first half of the year.

That has forced GM to order layoffs at two Michigan factories that build Cadillac cars, and raised questions about the long term future of the plants.

“We have to rebalance our sedan portfolio,” Johan de Nysschen told Reuters in interview, offering new details about the strategy.

Cadillac will not directly replace the current XTS, CTS or ATS sedans when they end their life cycles in 2019, he said. Instead, Cadillac will use a single new car called the CT5 to appeal to consumers shopping for sedans priced between $35,000 and $45,000. New versions of the CT6 sedan will be offered to customers who want a larger car starting at $50,000.

The CT5 will be built at a factory near Lansing, Michigan, that currently builds the slow-selling Cadillac ATS and CTS models. A small luxury sedan to compete with the Audi A3 will be built in the same plant, de Nysschen said.

Cadillac will offer more SUVs, starting with a compact model called XT4, followed by a larger SUV with three rows of seats due by 2019 to compete with vehicles such as Volvo’s current XC90 model.

Volvo, owned by China's Zhejiang Geely Holding Group [GEELY.UL], scored a public relations coup by announcing plans earlier this month to power all its vehicles with either hybrid or all-electric technology starting in 2019. The move challenges Tesla Inc TSLA.O, which has eclipsed more established brands with tech savvy luxury buyers.

Cadillac has plans “not dissimilar to what Volvo has announced,” with more electrified vehicles launching in the second half of the next decade, de Nysschen said.

To stay abreast of Tesla and others in the industry’s technology race, Cadillac will launch later this year its Super Cruise system that enables hands-free driving up to 85 miles (137 km) per hour.