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Industry News  Competitive Intelligence GM may shift gears with Hummer |
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GM may shift gears with Hummer
Print - FPinfomart - MCT Regional News - Tuesday July 15th, 2008
Jul. 12--The Hummer of Buffalo dealership on Transit Road in Clarence is hard to miss, with a showroom that looks like a Quonset hut and a rugged demonstration track for test drives.
As distinct as Hummer is, General Motors Corp. is mulling whether it still wants to own the brash, iconic brand. The automaker has retained Citigroup to undertake a 'strategic review' of Hummer.
GM says it is considering everything from a complete revamp of Hummer's product lineup to a partial or complete sale. The automaker said reviewing Hummer's status was among several steps it was taking in response to soaring oil prices and what it described as changes that are 'more structural than cyclical.'
Customers are flocking to fuel-efficient autos after watching gas prices at the pump soar past $4 per gallon and remain there. GM and other automakers are scrambling to respond to the consumer shift, which has weakened demand for SUVs and trucks, including Hummer.
The president of Western New York's only Hummer franchise, Steve Cappellino, said he understands GM wanting to evaluate its options with Hummer, but he thinks the brand has potential to grow with a good strategy.
'I think if [GM] did sell [the Hummer brand], they would sell with the right intentions,' said Cappellino, who was awarded his Hummer franchise in 2001 and has other GM brands in his lineup.
If someone buys the Hummer brand and is willing to invest in diversifying Hummer's product lineup, while maintaining the brand's iconic status, that could strengthen it, he said. For instance, Cappellino said, Hummer could benefit from adding a vehicle built on a crossover platform or a small SUV.
"I suspect somebody wants to invest in Hummer, so GM would be foolish to not listen," he said.
Hummer is a niche competitor, accounting for just 0.4 percent of all new trucks sold in the United States in June, according to Automotive News data. But it has widespread name recognition, which cuts both ways. Hummers turn heads on the road but they also draw fire from critics like the Sierra Club over their low gas mileage ratings.
Jesse Toprak, senior analyst with Edmunds.com, said selling Hummer could give GM a much-needed infusion of cash. Toprak said the automaker might also be motivated to sell if it thinks its connection to Hummer hurts GM's image with consumers increasingly sensitive to fuel economy and the environment.
Environmental issues aside, Toprak said, if GM does sell Hummer, the automaker could miss out on the brand's growth potential outside the United States in places like Russia, Eastern Europe and China.
"I think that decision has to be sort of thought through," he said.
Toprak says Hummer has lots of brand equity that a new owner could tap into. He noted that a couple of years ago, Mc- Donald's was giving away Hummer toys in Happy Meals.
Amid high gas prices, Hummer's national sales in the first half of the year plummeted 40 percent from a year ago, according to Automotive News. But locally, its sales were up until halfway through May, Cappellino said. At that point, the dealership ran into an inventory shortage due to the strike at American Axle & Manufacturing that disrupted Hummer production, as well as consumers' response to gas prices.
Cappellino believes Hummer sales have held up better in Buffalo than in many other places because the region is more of a Hummer H3 market than a H2 market. (The H3, a midsize SUV, is outselling the full-size H2 nationally this year by more than 3 to 1, according to Automotive News.)
Following GM's announcement about Hummer, The Wall Street Journal ran a story saying GM might undertake similar reviews of some of its other brands. A GM executive sent an email to GM dealers denying such additional reviews were in the works.
If GM does sell Hummer, who might buy it? Foreign companies are expected to be contenders. A publication in India recently reported that two India- based companies had approached GM regarding Hummer. One of them, Tata Motors, has already made news by acquiring Jaguar and Land Rover from Ford Motor Co.
Whatever GM decides about Hummer, Cappellino said he isn't worried about his franchise's prospects of the customers who own the vehicles. "I think [GM] would be responsible to the dealers and to the public,"he said.
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Copyright (c) 2008, The Buffalo News, N.Y.
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