GM Sells Hummer Brand to Chinese Company

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Researched by Industrial Info Resources (Sugar Land, Texas)--When General Motors Corporation (GM) (Detroit, Michigan) emerged from bankruptcy proceedings earlier this year, one of the company's primary goals was to get rid of underperforming brands in order to help the automotive giant crawl back into the realm of financial viability. GM has been attempting to cut loose Saturn, Saab, Opel and Hummer, all of which have been a drag on the bottom line for GM. Earlier this summer, reports emerged that a Chinese company was in serious negotiations to purchase the Hummer brand. Late last week, the announcement was made that the deal has been signed, and Hummer will officially become Chinese, pending government approval both here and overseas.

Sichuan Tengzhong Heavy Industrial Machinery Corporation (Chengdu, China) will own 80% of the Hummer brand, while Hong Kong investor Suolang Duoji, an indirect major shareholder in Sichuan Tengzhong, will take possession of the remaining 20% stake. While the exact sale price was not disclosed, $150 million was the figure leaked last week. GM had been hoping Hummer would go for as much as $500 million last summer, when the company first put the brand on the market.

Hummer's current management team will stay in place, headquartered in either Detroit or Auburn Hills, Michigan, and will have the task of rebuilding the struggling brand in a down economy, when consumers are clamoring for more fuel-efficient vehicles. The smallest Hummer model gets only 16 miles per gallon. The new owners will obviously be fighting an uphill battle in the coming months to reestablish Hummer's credibility as a viable standalone entity in the automotive marketplace.

GM will continue to assemble the commercial Hummer models, the Hummer H2 and H3, and the H2T and H3T pickups, on a contract basis at its assembly plant in Shreveport, Louisiana, which is currently scheduled to close by June 2012. The Shreveport plant also assembles the Chevrolet Colorado and the GMC Canyon pickup trucks. The military version of the Hummer, the H2, will continue to be assembled by AM General LLC (South Bend, Indiana) at its Mishawaka, Indiana, plant, also on a contract basis. AM General will retain the ownership of the military versions of the Hummer, while the commercial versions will be transferred to Sichuan Tengzhong.

How and where Hummer models will be assembled after the Shreveport plant closes is unknown. There are certainly plenty of closed, or soon-to-be-closed automotive plants in the U.S. that Sichuan Tengzhong could probably purchase inexpensively, including the Shreveport plant. The company could also transfer production to China.

Hummer sales have remained very slow this year. Only 8,193 Hummers were sold in the first nine months of 2009 in the U.S., 64% less than in 2008. Can the new owners find a way to boost sales to a level that will allow them to recoup their investment?

Reportedly, Sichuan Tengzhong plans to focus on improving the efficiency and performance of new Hummer models. The company may attempt to design the vehicles to use alternative fuels and have more fuel-efficient engines. The use of six-speed transmissions and diesel engines are also being considered. The Hummer lineup may also be introduced to new overseas markets.

In whatever ways Hummer is rebranded and remodeled, the fact remains that GM has finally rid itself of this brand, which it could not make profitable. Since the Saturn deal with Penske fell through at the last minute only weeks ago, GM has been pulling out all the stops to make some profit from Hummer. GM has lightened its load with this sale, but still has a long way to go to once again becoming a profitable automaker.

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