FROM OUR ARCHIVES: GM rides to Hummer's rescue -- July 5, 1999

Strapped for cash, AM General Corp. decided to sell the rights to the Hummer truck brand because it didn't see a way to broaden the product line on its own.

In an agreement announced last week, General Motors will acquire the Hummer brand, take over distribution and work on future products with South Bend, Ind.-based AM General. The deal, for undisclosed terms, is expected to be completed within three months. AM General will continue to manufacture the Hummer.

GM is turning aside all questions about future product plans. 'We obviously have bigger aspirations with leveraging the brand into other products,' said Ron Zarrella, president of GM North America.

MACHO IMAGE

Born for combat, the Hummer carries a brand image that reeks of toughness, utility and a go-it-alone attitude. Strictly a niche vehicle, nongovernment Hummer sales have ranged between 800 and 1,000 units in each of the past four years.

The Hummer is a Class 3 truck that shares the same undercarriage and riveted aluminum body as the military Humvee, which has been in production since 1984.

The Hummer was introduced to the civilian market in 1992 and has become a favorite of some movie stars, professional athletes and die-hard off-roaders.

AM General reported a net loss of $8.3 million on sales of $392.8 million for the fiscal year that ended Oct. 31. The company is owned by Renco Group Inc., which is controlled by New York financier Ira Rennert.

Now, with GM as a partner, AM General is allied with a company that built 2.4 million light trucks in North America last year.

'Things become possible that we could only dream of before,' said AM General spokesman Craig Mac Nab.

What might a smaller Hummer look like? Think of a Land Rover Defender or the Jeep Dakar concept, conjectured Douglas Scott, president of Allison-Fisher Inc., an auto-market research company in Southfield, Mich.

That would give GM a new niche sport-utility on the rugged side of the segment - balancing the market's shift to softer, car-based sport wagons.

A GM-designed small Hummer could be positioned as 'extremely rugged and tough but somewhat more mainstream to create a little bit of volume and high profitability,' Scott said.

DON'T DILUTE HUMMER

GM is not saying which of its dealers might get the Hummer to sell. Current models retail from $68,000 to $86,000. About half of the 52 North American retailers already are dualed with GM franchises, AM General said.

Hummer dealer Jim Lynch has a lot of questions about the GM deal. He owns Lynch Hummer in Wentzville, Mo., the largest and only stand-alone Hummer store in the United States. He sold 148 new and used Hummers last year.

Under no circumstances should GM cheapen the Hummer brand, he said.

'You'd ruin the name if you put it on a Jimmy or something like that,' Lynch said. 'That's not going to fly.'

You can reach John Couretas at autonews@crain.com
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