Hummer sale nears: Anybody want a big, lumbering car... company?
On Wednesday, insiders reported that Hummer, the ailing General Motors (GM) marque, was being bid on by three separate groups. The potential owners, one of which is based in the United States, would take control of the brand, although GM would continue to produce the actual vehicles.
How quickly time flies. It seems like only yesterday that India's Tata (TTM) and Mahindra car companies were talking about buying Hummer. However, it's been ten months and a lot has changed. Among other things, the Indian car companies have gone off in search of greener pastures, and GM's asking price has plummeted.
Gas prices have also come down and, in a turn of events that is sadly unsurprising, many analysts and consumers seem to have convinced themselves that the price of petroleum is going to stay low. A year ago, when Hummers began the transformation from prominent status symbols into tacky, lumbering relics of shameful consumerism, gas was hitting a record high and analysts were talking about a permanent price of $4 per gallon. Some, in fact, proposed keeping the cost artificially high in order to encourage increased automobile efficiency.
Noting the winds of change, Tata produced the Nano, which goes on sale today. The worlds cheapest car, it is a gas-sipper, and it will apparently be followed by electric (e-Nano) and compressed-air powered versions.
In the meantime, a Kentucky-based industrialist made a bid for Hummer. He offered $100 million in cash, a $100 million investment in engineering, and a plan for a new, improved Hummer that would get double the fuel economy of the current model. His bid was rejected last month.
Last year, when Hummer first went on the block, analysts estimated that it would go for between $500 million and $750 million. However, as consumers are still wary of new car purchases, Hummer is becoming a tougher sale. In addition to being a gas guzzler, it carries a steep $31,000 to $72,000 price tag at a time when consumer confidence is incredibly low. Current offers for the brand range from $100 million to $200 million, in addition to an acceptance of the company's liabilities and commitments to invest in engineering, marketing, and sales.
What's more, Hummer's new owners will also have to pay GM to produce the behemoths. The Shreveport, La., plant that builds Hummers also produces other GM models, which means that the ailing car maker has to hold onto it.
As in the case of Chrysler's 2007 sale, none of the three bidders are car manufacturers. Hummer's next owner will either be a private equity firm or a wealthy individual, making it yet another prominent, privately-owned car company. While positioning the brand as a small-scale, super-premium line might help it find a lingering place in the car market, it's hard to envision a bright future for Hummer.
In the context of Chrysler's current woes, it's possible that retrenchment as a privately-owned manufacturer will become the new road that car companies take on the way to dissolution.