The Future of Hummer Is In Foreign Hands

Posted by: David Kiley on August 17, 2008

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The iconic Hummer brand could soon be in the hands of Eastern Europeans.

Reuters is reporting that General Motors, which markets civilian vehicles under the Hummer brand has been in talks with Russia’s richest man, Oleg Deripaska, to sell the brand. Separately, sources have told Businessweek that Indian automaker Mahindra and Mahindra, as well as a Turkish private equity group have also inquired about buying the brand.

GM announced last June that it was evaluating the future of Hummer, which is code for seeking buyers. GM is hurting for enough cash to see it through its current woes and economic downturn in the U.S. It lost more than $15 billion in the second quarter alone.

Hummer, when gasoline was $2.00 a gallon and less, quickly became a hot brand, especially among a certain consumer that gravitates to gun culture, off-roading and adventure vacations. According to GM, the Hummer H2, when it launched in 2002, was a vehicle that many wealthy households would buy as a third, fourth or fifth car.

The Hummer H2, and H3, are modeled on the Humvee military vehicle built by AM General since before the first Gulf War. That military vehicle became a star on TV coverage of the war, leading AM General to build a street-legal version. GM bought the rights to the Hummer brand for street-legal vehicles in 1998.

Hummer sales are down about 40% this year. Besides higher gas prices, GM has seen Hummer become a kind of poster-brand for U.S. dependence on foreign oil. “Hummer Bummer” tee-shirts can be seen in many a U.S. city.

Hummer in October will launch the all new H3T pickup, a [you guessed it] pickup truck version of the Hummer H3. The ad campaign will position the vehicle as a serious off-roader with pickup truck utility. The five-cylinder base vehicle gets 14 mpg city and 18 mpg highway. Of course, that’s before you put anything or anyone in the vehicle. To say GM execs have privately groaned at the timing of the launch, planned four years ago, is an understatement.

Deripaska’s interest makes sense. Besides being assembled by AM General in South Bend, Indiana, the H2, which is built off the same chassis as the Chevy Tahoe SUV, the enormous vehicle has also been assembled in Kaliningrad, Russia, by Avtotor. The plant produces a few hundred vehicles annually, with sales limited to local consumption.

While Hummer sales have declined precipitously in the U.S., sales and interest is holding up abroad, especially in Eastern European and Middle Eastern countries where gasoline is much cheaper and in some cases subsidized by the government. Too, audacious looking vehicles like Hummer, often decked out in expensive after-market equipment, are popular with the growing number of wealthy Russians, including the “gangster class.”

The value of the worldwide rights to the Hummer brand vary depending on whom you ask. Analysts and executives familiar with GM discussions say it could be around $1.5 billion depending on how much cross-bidding there is. One thing is for certain, though, and that is the future value of Hummer is much more in overseas markets than the U.S.

According to Reuters, Deripaska, an aluminum magnate who has bought a stake in auto supplier and contract manufacturer Magna International, is worth an estimated £14 billion. It would be simple for him to leverage Magna’s capability to build whole vehicles, which it does for companies like BMW, to manufacture Hummers.

Hummer military vehicles are still manufactured by AM General. But the company’s future in that arena is somewhat clouded as the U.S. Army is reviewing new designs for a Humvee replacement. Industry sources have said in recent weeks that the company that emerges with control over the civilian Hummer brand may also be interested in acquiring AM General, which is privately held, as a way to be a bigger player in overseas military vehicle sales. That is especially the case with Mahindra, which is already in the military vehicle business, as well as Deripaska.

Reader Comments

gary

August 17, 2008 5:02 PM

While I don't have a Hummer several friends do and I've ridden in theirs. I like them. Very cool and big. It would be interesting to see what would happen to the brand if sold and in Russian hands.

Weldle Robert

August 17, 2008 9:35 PM

food for thought!

Drew

August 17, 2008 11:16 PM

Way to go America.

Tausif

August 18, 2008 1:08 AM

I guess nobody wants oil hungry vehicles anymore. Whoever buys it, God help them. I wonder why M&M is interested ...

ballbuster

August 18, 2008 5:16 AM

The Hummer Brand is the brainchild of that whats-his-name and the lack of leadership at GM's helm. Instead of using existing GMC truck divisions of GM, or Chevy to sell the Hummer , Wagoner listened to that whats-his-name and formed another GM division to the 8 already overlapping GM divisions. (Pontiac, GMC, Chevy, Cadillac, Buick, Saturn, Hummer, Saab) Where's the voice of wisdom from Wellburn? Lutz? Hendrix? When it comes to automobiles, Wagoner got the touch of death. Who killed the EV-1? or killed the entire line of Oldsmobile? Contrary to what Kiley would have you believe, the Hummer brand is too new to have any substantial loyal customer base for a new foreign owner. The Hummer brand is distinguished primarily by its "Tonker-Toy" sheet metal that any foreign manufacture can replicate. Indeed, Hummer is based entirely on old Chevy truck frame and engines. Like Kiley's superficial opinion, sheet-metal can only take a vehicle so far. Mahindra, Tata, Chery, or any European car company could easily replicate the Hummer's body style without paying the $1.5bil price. If I were Mr. Wagoner I would definitely invite Kiley to my next auto show because he earned it.

Interconnect

August 19, 2008 4:14 PM

As Ballbuster says anyone replicate Hummer's body style. The Middle East, CIS, GCC trade block, has companies like Mahindra & Mahindra, Mr Oleg Deripaska, several entrepreneurs, enterprising companies/organisation to grab license Hummer brand for progressive manufacture, license brand. Imagine the orders placed at Farnborough Air Show's record orders for new generation civil aircraft from Boeing, Airbus and others were from the Middle East, GCC countries which are buying hundreds of wide bodied new generation aircrafts. The US companies in chapter 11, debt ridden. Look at the region. GM's centenary year celebration will start next month September. There are hundreds of investors in the region, and thousands of buyers to order of the product which is made in their region, for them. Starting from the CIS countries which includes Afghanistan, Indo Pak subcontinent,Iran, Iraq, UAE, Saudi Arabia large countries big population and desire for the new Hummer H3T. The Kaliningrad, Russian facility of Avotor be enhanced, retooled for the new market of the region only, which could be consumed in no time. The least known market of the region, the hidden wealth and their craze for off roading on still roads not compliant to the US, Europe. A Hummer regional caravan is being planned from Russia, to the CIS region, including Afghanistan, Pakistan, Iran, Iraq, the whole Middle East, incluidng the UAE, Saudi Arabia aiming at enthusiasts, and investors to book their cars of MIddle East, including India. This region will buy thousands of Hummer if they're rallied in the September celerbrations, for GM's strength in the region for off roaders strength of GM achieved over the last 100 years in September.

Interconnect

August 20, 2008 3:40 PM

The world will see GM in completing a century the 100th anniversary, the centenary year 2008 September. GM from the internal combustion, to hybrid, EV's, fuel cell, and beyond. Market mechanism didn't stop GM from where it's today particularly about the Hummer. Middle East, CIS, SAARC region are potenteial promising markets for the Hummer family with investors and potential investors from Excellency Shaikh Mohammad chairman UAE's Emirates may purchase the brand and the facilities with just one successful ownership trend in Russian continent, INdo-Pak subcontinent. The off roader vehicle as Hummer will have a promising and future markets for such small vehicles. The Off roaders in demand in regional markets of Afghanistan, Indo-Pak subcontinent, Iran, Iraq, Sri Lanka, other markets of GCC, Middle East and the UAE which has excelled in aviation services between services thru out Middle East need bullet proof for upcoming civilian, military requirements. email: haroon.rashid@akunet.org

kuldip bhullar

October 23, 2008 12:56 AM

verry beautiful hummer

Raj

February 16, 2009 2:32 PM

I hope Mahindra & Mahindra buy it. They'll know what to do with the brand. A great vehicle like this won't go extinct because the market wants it and when we stop using gasoline and switch to other forms of energy like hydrogen everyone will be driving vehicles like the Hummer.

Robert D Lockman Sr

March 21, 2009 11:59 AM

If GM sells the Hummer to India it will be one huge F--Ked mess !! I work with those those clowns in Texas and they can't design a piping system that is workable.

Kelly

April 3, 2009 7:20 PM

I love how people ALL THE TIME TALK about HUMMER's Gas milage. I have owned a Hummer H3 for almost 4 years now. What's funny is that it gets the same (if not better) gas mileage as some of my friends Minivans and Crossovers. Why aren't people complaning about those cars/vans and suv's?

Kent

April 7, 2009 2:52 PM

I agree with Kelly.I have owned a Hummer H3 for three years and the gas consumption is about the same as a Blazer.Don't you think that this gas consumption issue is overplay?

T-Bear

April 9, 2009 8:35 PM

Way to go America! We may need to sell EVERYTHING to foreigners to pay off our national debt and budget deficit and interest!

Redding

May 22, 2009 5:28 PM

We own all Hummer H2s for company fleet vehicles are two Hummer H3s for private use. Despite the image thrown upon them by some over-zealous nature drunk tree hugging birkenstockers, they are still a great vehicle. The Hummer bashers should be required to own one (or seven) before mouthing off. GM's problem was established above -- It should have NEVER been its own brand, rather they should have boosted GM Truck sales with it.

Dave

December 8, 2010 8:58 AM

I own a H3 and it gets better mileage than my Tahoe did.It is also a much better vehicle than the Tahoe.It will go and do what the Tahoe wouldn't.GM has a habit of getting rid of the brands they should keep and keeping the ones they should loose.Thats the reason the tax payers had to bail them out.

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