Hummer plans while it waits
The to-do list of Hummer CEO Jim Taylor is 340 items long -- all due by Dec. 1. That's when he hopes General Motors Co. can close a deal to sell Hummer to China's Sichuan Tengzhong Heavy Industrial Machinery Co. Ltd.
"All our plans have to be in place so as to be ready to fire Dec. 1," Taylor told Automotive News.
Item No. 1: Kick-start Hummer sales, most of which are in the United States. Then Taylor must plan future products, including where to build them and what powertrains to use now that Hummer must meet federal fuel economy rules.
For now, he waits for the U.S. and Chinese governments to approve the sale. An approval by China, in particular, is not guaranteed. Taylor was told approval would take four to six weeks; Dec. 1 falls in week six. It could take longer.
Hummer's dealers are mindful of GM's recent aborted deal to sell Saturn to Penske Automotive Group. Said Christopher Leggio, president of Mark Christopher Hummer in Ontario, Calif.: "The quicker this closes, the sooner we see a business plan, the happier we'll be."
Spend big
If the deal goes through, Tengzhong is prepared to spend big on Hummer.
Taylor spent the first week of November in China, outlining his marketing, future products and manufacturing scenarios to the head of Tengzhong. "We asked him to agree to spend a lot of money upon closing," Taylor said.
He said the response from Tengzhong was "positive," but he declined to reveal the amount of his budget. Tengzhong understood the long-term investment needed to rebuild the brand when it bid for Hummer, Taylor said.
Once the deal is sealed, Taylor wants to speed vehicles to dealers and a marketing message to consumers. The message: "We're alive and well; we're here; we're open for business, and we've got product."
Tengzhong is willing to fund a marketing budget that will rival what GM spent to market Hummer in 2008, Taylor said. That year, Hummer spent $69.5 million on advertising, according to data from TNS Media Intelligence.
Many Hummer dealers are desperately short of vehicles. On Nov. 1, Hummer's 153 U.S. dealers had 1,300 vehicles on hand, down from 7,400 a year earlier. Last week, after months of no production, GM fired up output of the H3 SUV and H3T pickup.
Hummer sold 27,485 units in the United States in 2008, about half the 55,986 sold in 2007.
In 2010, Taylor wants global sales of 25,000, including 20,000 in the United States. It's a lofty goal. Through October, U.S. sales tumbled 64 percent to 8,500.
Defining 'nothing else'
Hummer will keep its tag line: "Like nothing else." But the definition of "Like nothing else" must change, Taylor said. Otherwise, he said, the risk is you "use an old line, keep your old products, but the world changes and now you're irrelevant."
Many dealers say changing the perception of Hummers as gas-guzzling behemoths will be critical to the brand's success.
Said John Sutliff, president of Sutliff Cadillac-Hummer-Saab in Mechanicsburg, Pa.: "You still see strangers come up to people in an H3 and ask, 'What kind of fuel economy do you get in that gas hog?' We struggle to educate the world on how well-rounded the brand is on fuel economy."
But the trucks' fuel economy has to improve. All light-vehicle manufacturers must reach a corporate average fuel economy rating of 35.5 mpg by 2016. Hummers' weight used to put them in the commercial-truck category, outside the scope of CAFE. But no more.
Said Taylor: "There's no way you can make those numbers without changing the product portfolio." He foresees changes in powertrains and vehicle size.
Product plan
Tengzhong has hired AVL Group, a Graz, Austria, engineering consultant, to help Hummer "answer what's our ultimate product plan," Taylor said. He expects Hummer to offer electric and hybrid powertrains to meet its fuel-efficiency targets.
The pending GM-Tengzhong deal gives Hummer access to engineering work done by GM on the H4, first shown as the concept HX at the 2008 Detroit auto show. Taylor plans to bring it to market in about three years.
After that, look for an even smaller H5. Most of Hummer's sales already have shifted down in size from the H2 to H3 and eventually will shift to the H4 and H5, Taylor predicted.
But Taylor has no idea who will build the H4 or where. Under the pending deal, GM would continue to build H3s for Hummer for the next two to three years. Tengzhong is not buying any tools or dies.
"Starting Day One in the new company, we have to quickly decide: What is our manufacturing and supply solution when the GM contracts turn off?" Taylor said. Hummer could continue to contract with GM for production of the H3 and with AM General for the H2, or it could go elsewhere.
Or, Taylor mused, "do we take it in-house?" If so, add more items to his to-do list.