GM comments set Hummer dealers on edge

updated 5:36 p.m. ET June 12, 2008

DETROIT - As if high gas prices, a weak economy and a strike by a major supplier weren't enough to drag down Hummer's sales, Hummer dealers are now reeling from the news that General Motors Corp. may consider selling the brand.

GM Chief Executive Rick Wagoner told shareholders last week that the automaker was conducting a strategic review of Hummer and was considering all options, from revamping of the lineup to a partial or complete sale. Wagoner gave no timeline or further details.

"I'm not real happy with General Motors right now," said Brad Johnson, general manager of Hummer of Columbus in Dublin, Ohio. "It was a poor choice of words on their part and it's a bad decision to come out and say something when you don't know what's going to happen."

Jim Bushart, parts director at Lynch Hummer in Chesterfield, Mo., said he assumed GM was analyzing the Hummer brand as gas prices reach $4 a gallon and consumers look for more fuel-efficient vehicles. But he was surprised the automaker discussed the review publicly.

"Maybe they were hoping that by making an announcement they would drum up some interest," he said.

Others griped that the company could hurt sales of Hummer's first pickup, the H3T, which comes out this summer.

GM spokesman Nick Richards said the company decided to announce the review, along with the closure of four plants, to demonstrate how seriously it takes the U.S. market's rapid shift away from trucks and sport utility vehicles.

At an event in Washington Thursday, GM's North America President Troy Clarke again refused to give a timetable for the review but indicated it will be done quickly.

"It's in our best interest to move forward in a very expeditious manner," he said. "It's not the kind of thing that gets better with time. We ought to make our assessments, be decisive and get moving forward."

Hummer has always been a niche brand, with U.S. sales reaching a peak of 71,524 in 2006. By comparison, Honda Motor Co. sold 53,299 Civic sedans last month alone. But unlike small cars whose sales have exploded this year, the Hummer niche is disappearing. Hummer took the worst hit of any brand through May of this year, with U.S. sales down 36 percent compared to the same period the year before, according to Autodata Corp.

Dan Towbin, who sits on GM's Hummer dealers' advisory board and whose 60,000-square-foot Las Vegas Hummer dealership is the largest in the U.S., said he wasn't surprised by the news of the review. Towbin said GM has assured him it's giving equal consideration to continuing the brand with newer, more fuel-efficient vehicles.

"Obviously the landscape has changed for the automotive industry for a lot of reasons. There's been a dramatic shift from trucks to cars and crossovers, and fuel is an issue for a brand like Hummer," he said. "Like any good business they must continue to analyze their assets and determine whether they're worthwhile to continually reinvest."

GM hasn't named any potential buyers, but they could include Indian automakers Tata Motors Ltd., which just acquired the Land Rover and Jaguar brands from Ford Motor Co., or Mahindra & Mahindra Ltd., which was in the running for Land Rover and Jaguar, according to Aaron Bragman, an auto analyst with Global Insight. Bragman said Chinese automakers also have shown some interest in acquiring an American brand.

But Bragman said there are significant barriers to a sale, including the tight credit market and the degree to which Hummer has been integrated into GM. For example, the midsize H3 shares a platform with GM's compact pickups.

"I can't see them selling it but I do see them restructuring and coming up with some new product, a rethink of what they're doing with it," Bragman said.

Hummer's fortunes were partly influenced by a three-month strike at American Axle and Manufacturing Holdings Inc., a major GM supplier. The strike shut down operations at more than 30 GM factories and at the AM General LLC plant in Mishawaka, Ind., which makes the Hummer H2 under contract for GM. AM General owned the Hummer brand until 1999, when GM bought the marketing rights.

The strike didn't shut down the GM plant in Shreveport, La., that makes the midsize H3. But the company shifted production from the H3 to compact pickups for three months because of parts shortages due to the strike, spokesman Tony Sapienza said. Production of the H3 resumed at the end of May.

Craig Hubble, general manager of Hummer of Novi and Detroit Hummer, said he is selling every vehicle he can get, but his inventory has been severely diminished.

"The demand is there. It's the supply," he said.

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