Hummer Is Going, Going But Not Gone Or Forgotten

by , Feb 26, 2010, 5:00 AM
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Hummer

Hummer's going, going, but definitely not gone -- or forgotten. Not by owners or dealers and probably not by the long tail of the Hummer aftermarket and used-vehicle business. General Motors says service and warranty plans will be honored.

Hummer dealerships started closing their doors in 2008, when gasoline prices spiked and GM announced plans to sell the franchise. By the fourth quarter, about 5% of U.S. Hummer dealers had closed, and General Motors was loading the vehicles with incentives as high as $9,000 to get them moving.

Since the vehicles -- from the "smallest" H3 to the luxury version of the H2 -- range from $31,000 to $64,000, those high-point incentives averaged out to around 20% of vehicle price, the highest in the auto business. But that still didn't help sales in a time when people were snapping up the most fuel-efficient cars and trucks they could find -- unless they needed a pickup.

Hummer sales have dropped more than any other brand in the past two years: In 2008, sales dropped by 50% to 27,485 vehicles, and last year saw sales drop by over 50% to 9,046 vehicles. The firm says sales of Hummers went from 1.2% of GM's total sales in January 2008 to 0.2% last month.

In 2008, with sales on the skids and GM heading into trouble, then-CEO Rick Wagoner announced the brand was on the block. Indian automakers showed interest, but last year China-based Tengzhong agreed to buy the brand for a price later disclosed as around $150 million. The deal was supposed to close last month. The deal was extended until the end of February when Tengzhong couldn't get the Chinese government's approval. On Wednesday, GM said the deal is dead.

Ray Ciccolo, owner of Village Automotive Group, a dealership group that includes Norwood, Mass.-based Hummer Village, says he's not ready to give up the ghost. "I think they are just posturing," he says. "General Motors is trying to get the Chinese to kind of commit. And there are other people who have expressed interest in the brand, so I think they will be going forward and if they don't, there will be a market for them, because it's very strong, and we sell all of the used Hummers we can get. We can't get enough of them; where else are you going to go to get something like that?"

A General Motors spokesperson insists the deal is dead. "Both parties made the joint decision to terminate the definitive agreement as they were unable to complete the deal, hence the announcement," he says -- adding that there are 153 Hummer dealers in the U.S., of which 16 are stand-alone, meaning they sell only Hummer. "All dealers will be handled according to the previously signed Dealer Transition Agreements," he says, referring to GM's plan last year to reduce dealerships. "We have not yet announced a timeline. However, the wind-down of a dealership typically takes several months."

One owner -- a Jacksonville, Fla., investment banker who owns an H2 -- says he's worried about parts and service, issues that GM says it will handle. "The first thing that goes through your head is, who's going to support the brand as far as being able to maintain the vehicles?" he says. "If you have issues, are there going to be parts in place? These are expensive vehicles, and if you plan on amortizing the expenses over many years, you wonder about finding someone who can maintain it."

He also says he is concerned about the resale value of the vehicle. "If I wanted to trade it in or outright sell it, what is the value?" As for the ownership experience, he says he likes the truck, although his wife is the main user. "The only negative is fuel economy, which is bad but consistent: 12 miles per gallon. But it drives very nicely, it's very quiet, and gives a very smooth ride and it's wide and roomy," he says.

Jeremy Anwyl, CEO of Edmunds.com, says Hummer isn't like Oldsmobile, another GM brand that was shuttered, because buyers could easily find similar vehicles. He says that because Hummer is unique, resale value may even grow as production ceases. "The trick with this is that they are distinctive -- the Harley-Davidson of SUVs if you like.

"Where are you going to go to get something like it when GM stops making them? You might find that since it can't be substituted easily, the demand maintains value in a way you wouldn't normally assume. When Oldsmobile went, there were other vehicles that matched. Not Hummer."

He also says that because under their skin they have GM parts, maintenance won't be a problem. "The H2, for example, is essentially a Chevy Tahoe."

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