Hummer Bummer: A death sentence?
From Automotive News:
Hummer Bummer: A death sentence?
June 10, 2008 - 12:01 am ET
In 2002, Jacques Moore added the Hummer brand to his Cadillac-Saab dealership in Richmond, Va.
As a pioneer with General Motors' new premium channel, Moore spent millions building a separate Hummer showroom. He was a satisfied Hummer dealer — until Tuesday. That's when GM made it clear it is pulling the plug on Hummer, saying it is considering "all options" for the brand, including selling it.
"I have a real problem, an ice pick in the eye, with GM's change in attitude here," Moore said. "Rather than talk about selling Hummer and doing away with a very cool iconic brand that the public really likes, why not give us a hybrid or two?"
That may be an option. But GM CEO Rick Wagoner made it clear that Hummer is the fat man in the lifeboat who might be tossed overboard.
Wagoner's announcement that GM plans a "strategic review" of the brand dismayed dealers who had spent millions on distinctive Quonset-hut styled stores with test tracks and a huge "H" framing the front door. It also cast doubt on GM's plans to build a premium sales channel of Cadillac, Hummer and Saab.
Hummer sales have collapsed in the face of $4-a-gallon gasoline. Through May, U.S. Hummer sales fell 36.0 percent compared with the year-ago period — and 48.1 percent from the same period in Hummer's peak year, 2006.
Last week, Wagoner said Hummer had added value to GM's portfolio. But in light of rising gasoline prices, he said, "that equation has changed."
In 1999, GM bought the marketing rights to Hummers from AM General in Mishawaka, Ind. After selling small numbers of the H1, based on the Humvee military vehicle, GM launched the full-sized H2 SUV in June 2002. With the SUV era at a peak, the H2 was a cultural sensation, although a polarizing one. GM followed up with a pickup version and the mid-sized H3.
Now, insiders say, leaders sees the brand as a liability that's hard to sell and hard to make fuel-efficient.
GM has said that 35 of the 170 Hummer dealers have stand-alone stores, with the rest paired with other GM brands. Earlier this year, Hummer General Manager Martin Walsh said GM had devised a reconfigured interior to make the Quonset huts suitable for other brands in the premium channel.
Wagoner has to be realistic about Hummer's future.
"GM has to focus on increasing profitability on volume vehicles, and Hummer doesn't do it," said Jim Hall, a former GM employee and managing director at 2953 Analytics, a consulting firm in suburban Detroit. "There's no such thing as a completely unredeemable brand, but the question is: What volume do they need out of it at this point for it to work?"
With sales falling and fuel-economy concerns rising, Hummer might be tough to sell. Hall said Hummer is a relatively unexploited nameplate outside North America that might appeal to a buyer who wants to compete overseas against Land Rover or Jeep.
A GM spokeswoman declined to speculate on the outcome.
"The strategic review is a very serious effort, or we wouldn't have announced it," said Hummer spokeswoman Joanne Krell. "But for Cadillac, Hummer and Saab, business continues as usual."
GM has not set a deadline for a decision but will move quickly, Krell said.
Some of GM's 170 Hummer dealers are still optimistic about the brand's future.
"We know the consumer wants more fuel-efficient vehicles — that doesn't surprise anyone," said John Bergstrom, CEO of Bergstrom Automotive in Neenah, Wis. "We're pushing the H3 five-cylinder, which gets 20 mpg, and that's our most popular model.
"We're hoping GM can come up with a hybrid system for the H3. We know they have a product on the drawing broad called the H4, and we're enthusiastic about that."
Bergstrom owns four Hummer stores in Wisconsin. He said if GM sells Hummer, he'll sell Hummers for the new owner. Others are not so agreeable.
"To me it would be a serious breach in our relationship and understanding with GM for them to do that," said Chris Hurd, owner of Hurd Auto Mall near Providence, R.I. "I'm a GM owner, first and foremost. I'm not interested in another owner."