Brand Health Check... Has GM's Hummer passed its sell-by date?

In one of the more surprising developments in the ongoing General Motors saga, the stricken US car giant recently agreed to sell Hummer to Sichuan Tengzhong Heavy Industrial Machinery Company.

While this is not the first time a Chinese firm has sniffed around an ailing Western car brand, the deal in some ways seems baffling. Hummer is a brand built on military-grade machinery. It is known for gas-guzzling SUVs at a time when the emphasis is on greener technology, and it symbolises conspicuous consumption in what is becoming a far more frugal age.

These trends appear to be reflected in Hummer’s financial performance. At its peak in 2006, Hummer in the US sold 71,524 units. However, it reported a 51 per cent decline in sales last year, and a 67 per cent fall in the months to April this year.

The rise in petrol prices and people’s growing consciousness on environmental issues are thought to be to blame.

Originally manufactured by AM General Corporation, the brand was intended for the US armed forces. The commercial version of Hummer came onto the market in the H2 and H3 models in 1992. General Motors bought the brand in 1998. The marque was popularised by actor-turned-California governor Arnold Schwarzenegger, who was reputedly the first person to own the consumer version and admired them for their “precision”. The former body builder gave up his fleet of Hummers in 2006 to boost his green credentials.

GM said Hummer’s purchaser would “aggressively fund future Hummer product programmes”. The deal, which is only for the consumer brand, is still under scrutiny in Beijing and Washington, and may yet founder. If it goes ahead, Tengzhong is said to planning investment of US$1.17 million into Hummer’s production in China. The question is, what should it do with a brand which is apparently past its sell-by date?

FACT BOX

- In 2006, Hummer hit record sales in the US, shifting 71,524 units during the year. - However, sales have been in freefall more recently. Sales fell 67 per cent year on year in the first four months of 2009, following a 51 per cent slide in 2008. - Tengzhong plans to manage Hummer in China, but keep it as a US-based company. The value of the deal has not been disclosed but is expected to be less than US$500 million.

Jonathan Chajet, MD China and strategy director, Interbrand APAC

Hummer is badly out-of-synch with a world where frugality is the new form of conspicuous consumption.

But the more visionary will argue that the brand still has potential, in China and globally. Hummer has a fascinating history, substantial brand awareness and highly distinctive brand equities. The costs of launching a new brand globally would far exceed the US$500 million that Tenzhong is expected to pay. And wealthy Chinese consumers are eager to show they’ve arrived (in style).

SUV owners often cite safety as a major purchase driver, and yet most SUVs today are positioned on status and spaciousness. Given its roots as a military vehicle, Hummer may find opportunity in safety and security. Think tight and powerful, like Jeep three decades ago.

But Hummer needs serious re-engineering. Its products need downsizing, its dealer network needs a jump-start and its advertising needs a major tune-up. It’s ridiculous to photograph the icon of environmental unfriendliness in unspoiled virgin territory.

Tengzhong has taken on a huge risk. But the global economic crisis will eventually end and men will renew their passion for toys. When this happens, Hummer may be able to sing again.


Michael Wood, CEO, Leo Burnett Greater China

Unless Tengzhong has a major contract with the Chinese military, it should stay far away from this brand.

It represents a time of conspicuous consumption which has abruptly ended. Also, the track record for Chinese companies buying distressed international brands and turning them around is less than stellar. A heavy industrial machinery manufacturer will likely lack the marketing knowledge and experience to reposition a vehicle that is now a poster child for excess and greed.

Its only option is to market the Hummer for industrial/commercial use, leveraging its functional capabilities in tough terrain conditions for which the original H1 was designed, thereby selling the vehicle in an environment where it performs at its best. Not the freeways of Los Angeles.

The Hummer represents all that went wrong with the US auto industry, an oversize disconnect with the current consumer reality. And why would it be any more right for the Chinese consumer market?

Returning Hummer to its roots, in the field, designed with bodies that meet the utility needs of commercial enterprises, delivered with the most fuel-efficient power-to-weight ratio, is the only viable future this vehicle has.

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