Buying a brand doesn't mean forever

GM dumped Lotus after 7 years; could Saab, Hummer acquisitions face similar fate?

Hummer may be sold.

Saab has lost its identity.

Will both brands go the way of Lotus, the performance car maker General Motors sold in the 1990s?

Group Lotus' engineering technology center and glorious racing history were the lures for GM, whose European operations consisted of two bland volume brands, Opel and Vauxhall.

GM bought Lotus and its U.S. subsidiary in 1986 for $32 million. But Lotus continued to bleed millions. GM relaunched the second-generation Elan in 1990, but it was a flop. Quality was poor, and enthusiasts didn't want a front-wheel-drive car with an Isuzu turbocharged engine and five-speed transmission.

In 1993, GM sold Lotus to Bugatti International. In 1996, Bugatti's owner sold Lotus to the Malaysian company Proton, which scored success with a new small roadster, the Elise. Lotus built versions of the Elise, the Opel Speedster and the Vauxhall VX220.

Going from half to whole

In 1986, GM bought 50 percent of Saab for $600 million from Investor AB, a Swedish investment company controlled by the Wallenberg family. Then GM waited a decade to purchase the remaining half. During those 10 years, Saab lost money and deteriorated.

All that changed with the arrival in 1996 of Bob Hendry, a protege of former GM CEO Jack Smith. Hendry quickly decided that Saab -- known for its quirky styling and four-cylinder, turbocharged engines -- could be positioned as a competitor against European luxury brands.

"I was positioning it in the center of premium. It was very complimentary to Cadillac with Saab being smaller, more European and sportier," Hendry said.

Hendry, now 64 and retired, said Saab didn't prosper because "the brand hadn't been defined" and because Saab appealed to "car buffs that were not enough volume to make the company run."

Hendry said GM waited a decade to acquire the other half of Saab because "the product had been going downhill."

"They were getting down to 89,000 cars the year before I went there. My charge was to go and assess it and the decision was to grow it, that it has a lot of potential and that we'll buy the rest."

Hendry was at the helm when Saab launched the new 9-3 and 9-5 cars. He said Saab made money in 1997 and 1998 "for the first time in its history."

The brand hasn't made money since. GM is banking on Saab's future with the next-generation 9-3 and 9-5 as well as the new 9-4X crossover and the 9-1 compact car.

Hummer is hurting

On June 3, CEO Rick Wagoner announced that GM is reviewing Hummer and considering all options, including selling the brand.

Before that announcement, John Middlebrook, GM vice president of sales, service and marketing operations, outlined why Hummer fit into the GM portfolio.

In the late 1990s, GM studied the SUV market and discovered "there was definitely a niche of rugged, militarylike appearance to vehicles, and it looked like there was kind of an untapped market out there," Middlebrook said.

That was the genesis of GM's creation of the Hummer brand, he said. "We had a good platform with our full-sized trucks to build the H2 on," Middlebrook said.

In 1999, GM bought the product, marketing and distribution rights to the Hummer brand. The H2 was launched in 2002, and the smaller H3 went on sale in 2005.

Middlebrook admits sales have fallen dramatically, and dealers are hurting because of their large investments: "There's no question that there's some suffering going on."

That suffering could turn into major pain -- especially for dealers who've poured millions into new facilities -- as GM ponders Hummer's fate.

You can reach Diana T. Kurylko at dkurylko@crain.com. -- Follow Diana on