DEALTALK-Interest likely to be tepid in Hummer sale
ju4 wa4i dia4n zo1ng he2 ba4o da4o :\n  (For more Reuters Dealtalks, double click on [DEALTALK/])\nBy Jui Chakravorty Das\nNEW YORK, June 5 (Reuters) - General Motors Corp's <GM.N>\niconic Hummer brand could fetch up to $750 million in a sale,\nbut would likely generate little interest and the company would\nprobably have to look overseas to attract even a few buyers.\nGM, the largest U.S. automaker, said on Tuesday it is\nreviewing its Hummer brand and could sell the SUV line, which\nhas become synonymous with gas-guzzling excess and has hurt\nGM's image at a time when consumers are demanding more fuel\nefficiency.\n"At this point we are considering all options for the\nHummer brand, everything from a complete revamp of the product\nline up to a complete sale of the brand," GM Chairman and Chief\nExecutive Rick Wagoner said.\nBut as oil prices touch all-time highs, interest in buying\na brand that provides 9 to 15 miles a gallon in fuel efficiency\nwill be thin.\nSome bankers said possible buyers could come out of Russia,\nwhere Hummer has a strong cache, and countries such as India\nand China, where automakers are looking to get a foothold in\nthe U.S. market.\nStill, even for those buyers, Hummer's biggest strength is\nits biggest weakness: it is a niche model with a limited\nproduct line.\nHummer makes bold sport utility vehicles that start at\nroughly $31,000 and go up to about $65,000. The brand was\noriginally conceptualized as a multipurpose, off-road military\nvehicle, and created what came to be known as Humvees for the\nU.S. military. Those were made by a company called AM General.\nGM bought the Hummer brand from AM General in 1999 and went\non to sell the H1, H2 and H3 civilian models that became the\nsymbols of toughness and coolness.\nCalifornia's governor, Arnold Schwarzenegger, added to the\nimage by boasting of a fleet of eight Hummers. He brought the\nbrand into every American living room when he famously referred\nto it while debating rivals during the gubernatorial race.\nBut as oil prices have risen, Hummer sales have fallen.\nU.S. demand -- which comprises the bulk of total Hummer sales\n-- has plunged 30 percent so far this year. Even the\n"Governator," as Schwarzenegger was dubbed, has sold his\nfleet.\nAnd with increasing environmental concerns, the image has\nquickly gone from cool to not-so-cool.\n"It's a very clear-cut, incredibly well-defined and very\nstrong brand name," Catherine Madden, senior automotive analyst\nfor Global Insight, said. "It's also a very high profit-margin\nvehicle line. But those profits could be marginalized\nsignificantly because of a segment shift in vehicle\npurchases."\nWith fuel prices at about $4 a gallon across many parts of\nthe United States, consumers are increasingly turning to\nfuel-efficient vehicles.\n"For foreign automakers looking to enter the U.S., it is\nnot a very attractive asset because it brings them into the\nmarket with a product that consumers are shying away from,"\nArgus Research analyst Kevin Tynan said.\nAnalysts and bankers don't see Ford Motor <F.N> or\nChrysler, now owned by Cerberus, showing an interest. "Both are\noverloaded with products that consumers are shifting away from\nand both are in precarious positions themselves," Madden said.\n"And Western Europe is not going to go running behind this\nbrand. Their infrastructure doesn't allow it and the cost of\ngasoline is higher there."\nOne banker, who declined to be identified, said a likely\nbuyer would be a rich Russian business oligarch who would view\nHummer as a trophy asset.\nOne person who comes to mind is Russian billionaire Oleg\nDeripaska, who owns GAZ OAO <GAZA.RTS>, Russia's second-largest\nautomaker. GAZ bought a stake in Canadian auto supplier Magna\nInternational <MGa.TO> last year.\nOther names that pop up amid speculation are Indian\nautomaker Mahindra & Mahindra Ltd <MAHM.BO>, which bid for\nFord's British brands Jaguar and Land Rover and lost out to\nrival Tata Motors Ltd <TAMO.BO> earlier this year.\nCandidates could also include China's Chery Automobile and\nGeely Automobile Holdings <0175.HK>, both of which want to\nenter the U.S. market.\nTOUGH SELL\nSome bankers agreed that the brand, considered a distressed\nasset amid current oil prices, could go for $500 million to\n$750 million. GM does not break down financial performance by\nbrand, but judging by Hummer's 2007 unit sales, its revenue was\nat least $2.5 billion.\nGM sold about 66,000 Hummers in 2007, of which about 55,000\nwere in the United States.\nBut IRN Inc analyst Erich Merkle said: "For anyone, from\nany part of the world, this would be a very tough sell. What's\nin it for any buyer?"\nOne more challenge a prospective buyer would face would be\naccess to the dealer network. GM currently sells Saab, Hummer\nand Cadillac in combined showrooms so a buyer would have to\nnegotiate access to the GM dealer network. That could also\nlimit the buyer to selling only Hummer vehicles in its\nshowrooms in the United States.\n"That would be a big challenge," Merkle said. "And to get\nfinancing for the purchase, and then for the ongoing working\ncapital would also be very challenging at this point in time."\nAnother possibility is that GM could end up with a\npartnership with someone either willing to invest in revamping\nthe line or willing to move the manufacturing overseas and help\nfocus the growth outside the United States.\nPrivate equity players, who had retreated from a buying\nspree as the availability of credit tightened, could partner\nwith an automaker to make a bid, but "chances of private equity\nwanting to take on Hummer are low," a banker said.\nGM has long been criticized for having too many brands with\noverlapping models. Billionaire investor Kirk Kerkorian, who\nbought a nearly 10 percent stake in GM in 2006 and placed his\naide, Jerry York, on the board, had then called on GM to get\nrid of its Hummer and Saab brands.\nGM was struggling then and is struggling again. It lost\n$3.25 billion in the first quarter, its U.S. sales plunged 30\npercent last month and it plans to restructure its product\nline-up. That begs the question: is Saab next?\n(Editing by Dave Zimmerman)\n((jui.chakravorty@thomsonreuters.com; 1 646 223 6033; Reuters\nMessaging: jui.chakravorty.reuters.com@reuters.net))\nKeywords: DEALTALK HUMMER/SALE\nKeywords: DEALTALK HUMMER/SALE