Deal for Hummer Dead, General Motors Announces Wind-Down of Brand

By Brendan Moore

As we noted a couple of hours ago in an update to Storm Clouds Gather over Hummer Acquisition, the deal to sell Hummer to Tengzhong of China for $150 million USD has been declared dead.

“Tengzhong worked earnestly to achieve an acquisition that it believed to be a tremendous opportunity to acquire a global brand at an attractive price,” Tengzhong said in its statement. “The renewed investment to be made by Tengzhong and other investors would have provided Hummer’s existing management team the ability to build greener utility vehicles that would have been attractive and useful in new markets such as China as well as the existing core markets.”

Sichuan Tengzhong Heavy Industrial Machines Co. Ltd. just wasn’t able to convince the Chinese authorities that buying a specialty SUV-pickup manufacturer was a good idea. The Chinese regulators, according to their public statements, never actually received an application from Tengzhong; the company apparently saw the handwriting on the wall from the informal talks they had with the regulatory agencies in China, and just gave up.

In what had to be considered “Plan B”, there had been some brave talk about getting external financing and managing the new venture from outside the country, but it was not to be, as it seems potential finance sources shied away from the business concept as well.

GM now plans to wind the brand down in an orderly fashion, as they are doing with Pontiac and Saturn. GM stated that it is still open to bids for Hummer as the wind-down process, as it was with Saab, but the happy ending the Saab brand had with a late bidder for the brand is the longest of long shots for the Hummer brand at this point.

Nick Richards, a spokesman for Hummer, said, “We just reached this decision today so we’re just beginning the process. Typically winding down a brand can take several months. If there are viable alternatives for part of the brand or all of the brand during the process we’ll consider them.”

There are 153 Hummer dealers in the US, and those dealers have around 2500 units in stock. Approximately 3000 jobs in the US are related to the building and selling of Hummers.

Hummer had its best year in 2006, when U.S. sales soared to 71,524. The decline came quickly, though, as demand plummeted when the cost of gasoline spiked to more than $4 per gallon in 2008. Sales last year plunged to 9,046.

However, the 2010 sales pace was even more miserable – the brand sold only 265 units nationwide in the month of January.

GM has been trying to sell Hummer since 2008, even before it declared bankruptcy, and early interest from potential buyers was high. The price was low for a complete brand with a US dealer network, but one by one, the potential suitors found something else to do with their capital as the global recession put the bite on the dream of owning a vehicle manufacturing company.

And, now, the party’s over. Only the hangover remains.

“We have since considered a number of possibilities for Hummer along the way, and we are disappointed that the deal with Tengzhong could not be completed,” John Smith, G.M.’s vice president for corporate planning and alliances, said in a statement. “G.M. will now work closely with Hummer employees, dealers and suppliers to wind down the business in an orderly and responsible manner.”

In what has to qualify as very bitter irony, the news of the deal going south and GM’s wind-down statement came on the same day that J.D. Power & Associates announced that they have ranked Hummer as owning the highest consumer satisfaction rating for dealer service among non-luxury brands.

AIn’t that a kick in the head?

Author: Brendan Moore

Brendan Moore is a Principal Consultant with Cedar Point Consulting , a management consulting practice based in the Washington, DC area. He also manages Autosavant Consulting, a separate practice within Cedar Point Consulting. where he advises businesses connected to the auto industry. Cedar Point Consulting can be found at http://www.cedarpointconsulting.com.

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