Why didn't they do that anyway? Cost issues?
Because GM, from when Roger Smith took over to when they declared bankruptcy in 2008, consistently and sometimes seemingly
intentionally did things that were
very god damned stupid for no discernible reason.
The Cimarron was mentioned earlier. Cadillac had access to a V6 that would connect to the drivetrain that the Cimarron (and its brethren) already utilized since they were based on the X-Body that the V6 was designed for. That alone probably would have been enough to justify the Cimarron over the Cavalier/Omega/Sunbird/Firehawk in its first couple years where the differences were so blatantly lacking. Maybe the debut year would have been a stretch to implement, but certainly it should not have taken 4 years for the Cimarron to get a V6 the car already could have accepted with ease. GM had two J-Body interiors that were considerably better designed and more modern looking at the time than the volume leader Cavalier.
Cimarron launched with only the same 1.8 piece of crap every other American J-Body had (and only got the V6 when the Cavalier did anyway) and the interior of a Cavalier but with leather and power windows.
Catera was the same way. The VT Commodore was designed with
the chance of American sales in mind before being cancelled at the last minute, just like Zeta was the decade following. It had a drivetrain package that GM already produced in America and had already implemented into American market RWD cars for years; and was well regarded for its smoothness, being lightweight-ish, being fuel efficient and with a track record as fairly indestructible. There was also a more powerful version of that engine already designed and on the market, even ignoring the space for a V8 the car always was supposed to accomodate. It almost certainly would have been cheaper for GM to utilize the Commodore version of the platform instead of the Omega one, both in costs per car and in maintenance costs for the company. GM imported the European version instead, with its fussy transmission and overly complicated, catastrophically unreliable engine that were both produced only in Europe and contributed to a less powerful, more expensive and much heavier car.
Put another way, everything the original CTS was lauded for (except the styling), up to and including the BMW M5-chasing CTS-v, were things Cadillac could have done with the Catera 7 years earlier because they had almost all of the same pieces in place. They just didn't use them and used something else instead.