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HUMMER might get reprieve
Hummer might get reprieve
But GM would need more models to sell
BY MARK PHELAN • FREE PRESS COLUMNIST • June 15, 2008
The music may not have stopped playing for Hummer.
General Motors' decision to keep, kill or sell the brand revered and reviled for its rugged SUVs is less clear-cut than Hummer haters might expect. GM's leaders must evaluate a complex set of economic and emotional factors as they weigh Hummer's fate.
No brand in the auto industry evokes stronger feelings than Hummer. Some people despise it as the embodiment of wasteful arrogance. Others -- not as many, but they're the ones who buy Hummers, so their vote counts more -- love the vehicles' extraordinary capability and styling braggadocio.
Hummer's fate hangs in the balance of those forces, GM's ability to develop more vehicles for the brand, and the legal hailstorm its dealers will call down on GM if their pricey franchises suddenly become valueless.
In the meantime, Hummer soldiers on. The 2009 H3T midsize pickup enters production shortly at GM's Shreveport, La., plant and goes on sale this fall. Eliminating Hummer would endanger the Shreveport plant's future. Hummer's other model, the bigger H2, is produced for GM by AM General in Indiana. AM General developed and builds the Humvee military vehicle that created the brand's mystique.
The H3T is part of GM's longstanding plan to broaden Hummer's lineup and sell the vehicles around the world. With dealers in 37 countries and assembly in South Africa as well as the United States, "the potential for global growth is a huge opportunity. It's one of Hummer's strengths," spokeswoman Joanne Krell said. Developing markets in Asia, Central and Eastern Europe look particularly promising.
"There is global demand for Hummer," said analyst Rebecca Lindland of Global Insight in Lexington, Mass.
The global strategy is contingent on Hummer's ability to develop a multi-model lineup. That's in question as GM accelerates the introduction of small cars and fuel-saving technologies in response to skyrocketing U.S. gas prices.
"In an environment where engineering resources are driven by the need for high-m.p.g. vehicles, can you justify vehicles that don't contribute to that?" asked Jim Hall, managing director of 2953 Analytics, a Birmingham research and forecasting firm. "Where do you find the money to do a Hummer and do it right?"
Doing Hummer right means that every vehicle it sells must have unparalleled off-road capability. Anything less would gut the brand, making its owners the image-driven poseurs Hummer haters already believe them to be.
For that reason, you're not likely to see a gasoline-electric hybrid Hummer -- too much weight and complexity for the backcountry -- but the brand will offer biodiesel-powered versions of all its vehicles by 2010. Biodiesel isn't made from oil and improves fuel economy 30% or so versus gasoline-powered versions of the same vehicle.
While the product planners look for platforms and technologies that could fit Hummer, strategists within GM ponder the idea of redefining the brand, perhaps as a line of environmentally friendly SUVs.
"It's never going to be a green brand, but you can wash it in green," said Joe Phillippi, principal of AutoTrends Consulting, Short Hills, N.J.
"In the end, I think they'll develop the" smaller "H4 and improve the fuel economy of the H3 and H2."
Hummer became an emotional lightning rod because the H2's cartoonish looks painted a bull's-eye on the brand. It's an obvious receptacle for the antipathy toward SUVs.
"Hummer hasn't done a good job of getting credit for the good things its vehicles have been used for," Lindland said. "Hummers were an unbelievable help during Hurricane Katrina," which devastated New Orleans and coastal Mississippi in 2005. " ... There are some things only a Hummer can do, and that can be very useful."
GM insiders must also figure out whether Hummer's mere existence will undermine the good publicity it hopes to reap when the Chevrolet Volt extended-range electric vehicle goes on sale in 2010.
"Has offering Hummers to date cost GM any sales? Probably not," Hall said. "In a world of $4 or $5 a gallon gas, if GM pulls off the Volt, Hummer won't hurt them."
Dumping Hummer, on the other hand, could be very expensive.
"The dealers have invested massive capital in the brand," Phillippi said. "If GM shuts Hummer down, every dealer is going to file a multimillion-dollar suit, and owners will file class-action suits.
"That's a headache GM doesn't need," even though many of the actions -- particularly those from disgruntled owners -- would be nuisance suits, Phillippi said.
Finding a buyer to take over Hummer is problematic, too. A new owner who can't credibly promise to maintain the brand would spawn another rash of lawsuits, and the only companies with automaking experience likely to be interested are Indian and Chinese companies looking for a foothold in the West. None of those companies have built vehicles like Hummers, so GM would probably remain the source of parts and technology for years to come.
So, does Hummer stay or does it go?
Right now, your guess is probably as good as GM Chairman Rick Wagoner's.
Contact MARK PHELAN at 313-222-6731 or email@example.com
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