Hummer, the most potent symbol of General Motors' commitment to giant gas-guzzling SUVs, will apparently survive the company's bankruptcy filing.
GM has a deal to sell the SUV brand to China's Sichuan Tengzhong Heavy Industrial Machinery, the companies said on June 2. Sichuan Tengzhong specializes in building heavy-duty construction trucks in China.
GM to Retain Assembly
What will the Chinese automaker do with Hummer? One source close to the situation says Sichuan Tengzhong will market the brand globally, as GM has been trying to do, and probably build Hummer vehicles in other plants around the globe.
GM put the brand up for sale last year to raise cash and begin streamlining its product offerings. If GM couldn't find a buyer, Hummer probably would have been shut down as part of the bankruptcy proceedings the automaker entered on June 1. Former Hummer owner AM General, which builds the original military Humvee on which the brand was based, also was interested in buying it back. But it couldn't reach a deal with GM.
GM will supply the H2 and H3 SUVs to Sichuan Tengzhong, but for how long remains unclear. GM said it will form a long-term agreement to assemble Hummers for Sichuan Tengzhong, but the companies did not specify which SUVs would be built. The Chinese company will keep Hummer's dealer network and management team. The two sides could make a deal in which GM keeps building the H3. GM builds the H2 at a plant in Indiana that is owned by AM General. The three companies could work out an agreement to keep that model going a well.
Upscale or Downmarket?
How much growth, if any, there is for Hummer is uncertain. Hummer sales fell 51% last year, to 27,485 vehicles, as fuel prices spiked. The brand has fallen out of favor since its peak sales in 2007 of 56,000 SUVs. Fuel prices and the Hummer's militaristic, anti-green image played a role in knocking it from its perch as one of the hottest brands earlier in the decade. Even the smaller H3 version only gets about 16 mpg.
The new owner could either take Hummer upscale and try to make it the top choice for off-roading enthusiasts, or it could broaden the product line and move pricing downmarket, says James Hall, principal of auto consulting firm 2953 Analytics. But doing that means the company would need to invest more in models and factories.
For the brand to be successful, Hummer will have to spark a rebound in its home market. "The real draw for Hummer is in the U.S.," Hall says.
GM has not announced a price for the deal, but the company said in court documents that Hummer's estimated worth is $500 million. That doesn't mean GM can get that much for it, though.
Welch is BusinessWeek's Detroit bureau chief.