Only last-minute buyer will save Hummer brand

[February 25, 2010]  NEW YORK (AP) -- Unless a last-minute buyer steps forward, General Motors Co.'s Hummer brand is fading into history.

The sale of the SUV brand with military roots to a Chinese heavy equipment maker has collapsed. GM said it would still hear offers for the company, but potential investors would have to move fast.

"In the early phases of the wind-down, we'll entertain offers and determine their viability, but that will have to happen in pretty short order," said GM spokesman Nick Richards.

GM said Wednesday that its bid to sell Hummer to Sichuan Tengzhong Heavy Industrial Machines Co. fell through. The Chinese manufacturer said it failed to get clearance from regulators in Beijing within the proposed timeframe for the sale.

GM will continue to honor warranties for current Hummer owners.

"We are disappointed that the deal with Tengzhong could not be completed," said John Smith, GM vice president of corporate planning and alliances. "GM will now work closely with Hummer employees, dealers and suppliers to wind down the business in an orderly and responsible manner."

GM did not disclose a timeframe for winding down the brand, which employs 3,000 people in the U.S. Hummer will be the second division after Saturn that GM failed to sell as planned. Its one successful sale was Swedish car brand Saab, which is going to Dutch carmaker Spyker Cars NV in a $74 million deal.

That sale came together at the last minute after a deal with a group led by another Swedish car manufacturer fell apart. A similar outcome for Hummer would be its only hope of survival, but no new buyers had emerged as of Wednesday evening, Richards said.

The deal's backers in China had been racing to save the acquisition this week. As recently as Tuesday, private investors were trying to set up an offshore entity in a last-minute effort to complete the deal ahead of a Feb. 28 deadline.

That scheme, along with other plans that investors were considering, was unsuccessful, according to a person close to the situation. The person declined to be identified in order to speak more freely.

"There's no way forward with that," this person said. "We're out of time."

Tengzhong said it was disappointed with the deal's collapse.

"Tengzhong worked earnestly to achieve an acquisition that it believed to be a tremendous opportunity to acquire a global brand at an attractive price," it said in a statement, thanking GM, Hummer, its executives, and employees.

Hummer, which traces its origins to the Humvee military vehicle built by AM General LLC in South Bend, Ind., acquired a devoted following among SUV lovers. But Hummer was always a polarizing brand with a fuel-thirsty lineup that many saw as symbols of excess.

Hummer sales peaked at 71,524 in 2006. But they collapsed when gas prices shot above $4 a gallon in the summer of 2008 and never recovered. In December 2009, only 325 Hummers were sold, down 85 percent from the previous year, according to Autodata Corp.

Sticker prices start at more than $42,500 and run to about $63,000, according to data posted at the Hummer.com Web site. The H3, the most fuel-efficient vehicle in Hummer's lineup, averages about 16 mpg. The vehicles are built at GM's factory in Shreveport, La.

Under the initial agreement to sell Hummer, Tengzhong would have received an 80 percent stake, while Hong Kong investor Suolang Duoji, who indirectly owns a big stake in Tengzhong, would have gotten 20 percent. The investors would also have owned Hummer's nationwide dealer network.

Financial terms of the sale were not disclosed, although a person briefed on the deal at the time said the sale price was around $150 million. GM's bankruptcy filing last summer said that the brand could bring in $500 million or more.

Beijing had been cool to the acquisition. Tengzhong lacks a government permit to manufacture cars, and the Chinese government has been seeking to streamline and slow investment in the fast-growing auto industry rather than to attract newcomers.

Richards said the collapse of the sale does not change earlier plans to close the Shreveport facility by 2012. The plant also builds the Chevy Colorado and GMC Canyon trucks and is currently operating on a single 10-hour shift, he said. Hummer production was idled in January.

The plant once employed about 3,000 people, but that payroll has been reduced to about 950.

Plant worker Alex Santana, a 17-year veteran of the Shreveport operation, said the end of Hummer "is going to hurt a lot of people."

"There's a lot of jobs going down the drain," he said.

[Associated Press; By DAN STRUMPF]

AP business writers Alan Sayre in New Orleans and Elaine Kurtenbach in Shanghai contributed to this story.

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