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Is Hummer heading to the Gulf?

2008-08-27 08:48

John Irish

Dubai - Two Gulf Arab investors have expressed interest in buying General Motors Corp'sHummer brand, the company's Middle East chief told Reuters on Tuesday.

"For sure, there has been interest from various parties within the Gulf ... there is a precedent in the cases of Aston Martin, Ferrari or Daimler and those kinds of solutions could be very realistic solutions," GM Middle East managing director Terry Johnsson said in a telephone interview.

GM was readying sales documents for its Hummer brand and had initial expressions of interest from potential buyers that it hoped to develop into formal sale talks, the automaker's Chief Executive Rick Wagoner said on August 21.

"Apparently, we have had two separate investors raise their hand as being interested, but I don't know what's happened since then," Johnsson said.

Johnsson said he was not directly involved in the sale process.

Analysts have said they expect the military-derived Hummer brand to be a tough sell for GM, which aims to raise up to $4 billion in asset sales through 2009 as part of a plan to conserve cash and ride out a brutal downturn in US sales.

Making vehicles that average between nine and 14 miles per gallon, Hummer is not a particularly attractive asset as gasoline prices squeeze drivers worldwide and environmental concerns increasingly trump any other notion of what is cool.

Modeled on US military vehicles widely deployed in the Gulf War in 1991, the Hummer sports utility vehicle (SUV) made its debut shortly afterwards, when US gasoline prices were less than half what they are now.

GM's US sales were down 18% through July and analysts have raised concern about a cash burn at the top US automaker that reached $3.6 billion in the latest quarter.

Detroit automakers have been hit hard by a dramatic shift in buying to passenger cars and fuel-efficient, car-based SUVs, forcing them to restructure.

The Gulf would be one viable option where rapid economic growth, low fuel prices and the brand's position as a status symbol have made the region one of the biggest buyers of the Hummer.

"The Hummer as a total volume is small, but in terms of growth it is going very fast," said Johnsson. "The brand is extremely vibrant ... which augurs very well."

Tata Motors Ltd, India's number one vehicle maker, in June completed the $2.3 billion acquisition of Jaguar and Land Rover from Ford Motor Company.

Abu Dhabi's Mubadala Development Co bought a 5% stake in Ferrari in 2005, while Kuwait's Investment Dar last year bought half of Aston Martin.


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