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Hummer in talks with bidders

2008-08-04 15:13

General Motors is in talks with Indian carmaker Mahindra & Mahindra and carmakers in Russia and China about selling its Hummer brand, sources familiar with the matter said.

One source close to the discussions said Mahindra is not very interested at this time, as it has plans to launch its own trucks and sport utility vehicles in the US market.

Mahindra would like to launch those vehicles under its own brand and has signed up more than 300 dealers to distribute a pickup truck next year. But talks with GM - still in initial stages - are continuing, the source said Thursday.

GM declined comment. Mahindra was not immediately reachable for comment.

The sources did not name the Russian and Chinese companies talking with GM.

GM, which has said it will try to raise up to $4 billion through asset sales, has hired consultants and investment bankers to review the Chinese market for potential buyers for GM assets, one of the sources said.

The struggling US automaker, which has lost more than $51 billion over the past three years, said in June it was reviewing its Hummer brand, which has hurt GM's image at a time when consumers are demanding more fuel efficiency.

Amid high gasoline prices, interest in buying a brand that gets only nine to 15 miles a gallon has been thin and continues to shrink, one source said.
Hurt by an association with gas-guzzling excess, Hummer's US sales fell 40 percent in the first half of the year.

As part of a move to cut 300 000 light trucks from its planned production over the remainder of the year, GM has idled or slowed work at its Hummer assembly plants to run down inventories of unsold SUVs.

Mahindra challenges

A purchase of Hummer by Mahindra - which bid for Ford's British brands Jaguar and Land Rover and lost out to rival Tata - would present major challenges for the Indian carmaker, one adviser familiar with the matter said.

Mahindra is concerned that it lacks the scale to wring costs out of Hummer production, and any deal would probably have to include a commitment from GM to keep supplying products for several years, the adviser said.

Also, the upscale image of the Hummer brand is a long way from the Mahindra-badged small pickup truck slated to hit US dealers next year and its Scorpio SUV to be brought in after.

The vehicles are expected to be marketed on their low price and relative fuel economy - a sharp break with Hummer's established strategy of marketing tough-looking, military-derived vehicles to wealthier consumers.

Also, the Hummer US dealership network would be a bad fit for Mahindra because GM's franchises are in more affluent neighborhoods where car shoppers will be looking for luxury brands, the adviser said.
Despite the concerns, Mahindra would go for Hummer if the price were right, two of the people familiar said.

Russia, China

Hummer's bold SUVs - originally conceived as multipurpose, off-road military vehicles - have a strong cache in Russia and China.

Investment bankers have said that a Hummer bidder could be a rich business oligarch who would view Hummer as a trophy asset. One likely buyer could be Russian billionaire Oleg Deripaska, who controls GAZ, Russia's second-largest automaker.

GAZ OAO is already planning to create a $1bn joint venture with GM to compete with French rival Renault SA in Russia, Europe's largest car market.

The Chinese party involved in talks with GM could be SAIC, China's biggest automaker. SAIC has a joint venture with GM in China and has been eager to enter the US market.

Other possible candidates could be Chery Automobile or Geely Automobile Holdings Ltd, both of which have been eyeing the US market.

But a Chery spokesman recently told Reuters there have been no talks on Hummer "at the management level."


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