With Hummer Going to China, What’s Next for the Brand?
By Chris Haak
06.02.2009
As we noted earlier today, Bloomberg has learned that GM has sold its Hummer brand to Sichuan Tengzhong Heavy Industrial Machinery Co. Ltd., a Chinese equipment maker. Bloomberg’s article noted that they confirmed the sale with no fewer than five sources before going to print with it, so let’s take it at face value for the moment. Apparently, part of the sale agreement required that the buyer’s identity not be disclosed until after the sale had closed (expected by the end of the third quarter), but it appears that hope was nothing more than a pipe dream.
GM made a lot of noise yesterday about how Hummer’s new buyer had promised to continue to invest in the brand and improve the vehicles, as well as work on alternate fuel versions that ran on E85, diesel, or other fuels. The fact about the Hummer brand is, it has some niche appeal elsewhere in the world, but most of the rest of the world outside of rich Russian tycoons and Middle Easterners with petroleum-provided fortunes, most folks just find the existing H2 and H3 models too large and too thirsty to be practical as a vehicle they use regularly. On top of that, countries like China tax large-displacement engines with oppressively-high taxes (40% on vehicles with engines of 4.0 liters and above), putting Hummers out of reach of most of the population in their future home country.
If the sale is confirmed by either party (which seems to be a near-certainty of happening prior to the transaction’s closing date), it would mark the first acquisition of a major US-based automotive brand by a Chinese company.
In the short term, if Sichuan Tengzhong indeed does invest some money into the brand, it should immediately do everything that it can to launch the oft-delayed, yet well-regarded Hummer H4, which was previewed at the 2008 Detroit Auto Show was the HX concept. The H4 was obviously the missing link in the Hummer lineup, and one that probably should have been built before the smaller-but-not-small-enough H3 to pull Hummer’s environmental image out of the gutter. Not only would it have been more maneuverable in off-road situations and used less fuel, it would have given Hummer a legitimate Jeep Wrangler competitor, while managing to keep a style of its own (excepting the seven-bar grille that both brands share).
Sichuan Tengzhong, with no US experience or presence to speak of (at least according to the company’s website), may have a difficult time marketing a vehicle as all-American as a Hummer, which a [nearly] all-American company like GM was catastrophically failing to do for the past several years. Saving a bit of the American imagery for Hummer over the next few years is the fact that GM and AM General will continue to build the H3 and H2, respectively, for the Sichuan Tengzhong for another couple of years. So at least it won’t be built in China, at least in the near term.
From a job-saved standpoint, I’m glad that GM was able to find a buyer for Hummer; reportedly, the sale is preserving something on the order of 3,000 jobs (though it’s not clear if that is only on the manufacturing and engieering side, or also on the dealership side). On top of that, the reported $500 million sale price certainly helps GM’s creditors with a certain amount of recovery; had Hummer just been unceremoniously shuttered, recovery would have been far less.
It would be most interesting to me if Sichuan Tengzhong were to acquire the rights to sell the Dongfeng Crazy Soldier, which is a Chinese-market Hummer H1 knockoff that we poked fun of almost two years ago. The H4, however, seems to be the Hummer vehicle with the best chance of success outside of the Middle East, US, or Russia.
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