China hits reverse on letting GM sell its Hummer line. Now what?
The Hummer deal-or-no-deal has been alternately humorous and depressing, pitting the slapstick of GM's amazing tone-deafness against the tragedy that accompanies any slow-motion car wreck. It's been almost exactly a year since Tata and Mahindra, India's dueling car companies, were lining up to compete for Hummer. In classic style, however, GM seemed unable to read the gargantuan writing on the wall, and decided to play it cool. Tata and Mahindra soon lost interest in the coy carmaker, and GM found itself stuck with what amounted to a huge cut of increasingly fragrant rotten meat.
As of two months ago, three bidders were still at the table, and none was a car company. The winner, Sichuan Tengzhong Heavy Industries, builds cement-mixers, tow trucks, and other heavy industrial machinery. While it's reasonable to ask how any company could hope to keep Hummer alive in an increasingly green-oriented business environment, this question is particularly apt for Sichuan Tengzhong, which has no experience in the car market.
Admittedly, China's state-controlled gas prices and lax environmental standards make it prime territory for Hummer sales. But it's hard to imagine the pricey brand selling well in the Middle Kingdom. For years, Hummer has been rumored to be mulling over a streamlined, smaller, greener model; in fact, this was part of the plan of one of April's bidders.
But on a fundamental level, the idea of an eco-friendly (or hybrid) Hummer is as oxymoronic as a luxury Tata Nano. Hummer has marketed itself to the kind of resource-gobbling drivers who secretly dream of eating the last survivor of an endangered species. Attempting to sell them on a mini-enviroment killer, rather than the real McCoy, is likely to be tough.
In their push to block the Hummer deal, China's government cited both Sichuan Tengzhong's inexperience and a statewide push to improve the environment. These are legitimate reasons to fight the sale, but the brand's bleak future likely played a major part. While China is trying to expand abroad, it's also clear that a false move, especially at this stage of its development, could prove devastating.
Another major concern for China may have been Hummer's factory in Shreveport, Louisiana. GM has been trying to shop a deal requiring the company's buyer to have Hummers built in America, with commitments to parts contracts. Anyone who buys Hummer is essentially also buying 3,000 expensive American workers and a longterm contract fused to GM. Given Detroit's current economic woes, that option may be a dealbreaker.
With the Chinese sale falling through, it's unclear what Hummer's next step will be. Plans are afoot to close the Shreveport plant no later than 2012, as GM is heading back into the operating room to saw off its most gangrenous limb. Optimists are hoping for a bailout by Mahindra. On one level, owning an American icon could help the Indian company break into the U.S. -- but Hummer seems an awkward match for Mahindra's line of gas-sipping cars.
However this soap opera plays out, it's clearly time for GM to adopt more realistic expectations about selling this unloved brand.