Look out, world. Cadillac has unveiled its new ATS sports sedan as a rival to Europe’s best small luxury cars. Read the full story after the jump!

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Cadillac today will tout its new ATS sports sedan as a worthy rival to the best European small luxury cars and a step toward transforming the 110-year-old U.S. brand into a global powerhouse.

The ATS is Cadillac’s first small car since the Cimarron in the 1980s. While the Cimarron flopped, General Motors Co. executives see the ATS as a formidable rival for the BMW 3 series — the best-selling luxury sedan in the United States and the world — as well as the Audi A4 and Mercedes C class.

The car debuts at the auto show here this week after an unveiling by GM’s top executives this evening at the College for Creative Studies, one of the nation’s top automotive design schools. It goes on sale in late summer.

“The ATS aims to change the status quo of the European-dominated segment,” Don Butler, Cadillac’s vice president of marketing, said in a statement.

That Cadillac’s most critical launch in years is a small car might seem ironic for a brand best known historically for hulking sedans. But GM believes compacts have emerged as the most important segment in the global luxury market, in part because of their role as an entry point for younger consumers.

“All the luxury automakers are going for that piece of the pie because that’s where the volume is,” says Jim Hall, principal of consultancy 2953 Analytics Inc. in suburban Detroit. “Cadillac has got to be there.”

Cadillac — once the top-selling luxury brand in the U.S. market — has been surpassed since the late 1990s by European rivals BMW and Mercedes, and Toyota Motor Corp.’s Lexus division.

In some cases, GM’s flagship brand has been late to enter hot product segments such as SUVs or crossovers, or failed to gain traction with models such as the Catera or XLR roadster.

GM’s financial woes have also forced Cadillac to pare its lineup and in some cases, delay products.

The ATS will be slotted below the mid-sized CTS sedan, the brand’s top-selling car. Hall says the ATS has a chance to eventually surpass the CTS as Cadillac’s volume leader.

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