End of the road looms for Hummer

Update The controversial Hummer four-wheel vehicle may have a second life as a collector car in Australia once the US-parent company closes the division, a local importer says.

General Motors, now majority owned by the US government, said it would ''wind down'' its Hummer division after plans to sell the unit to a Chinese company fell through. Chinese government objections to the vehicles' heavy fuel use are believed to have scuttled the $US150 million ($168 million) deal.

James Hill, sales director at the Melbourne-based Hummer Australia is pinning his hopes on a lively second-hand market for the monster vehicles.

''There have been lots of brands and models discontinued in the past and people still have a desire to buy them,'' Mr Hill said, drawing a parallel with the on-going local popularity of the Holden Monaro.

''The Holden Monaro is a discontinued vehicle people still wanted to buy and all it did was pull the prices up.''

Holden Australia, meanwhile, said it was ''disappointed'' by the news that its parent GM was unable to complete the sale of Hummer to China's Sichuan Tengzhong Heavy Industrial Machinery Co.

''From Holden's perspective, as the local distributor, we'll absolutely continue to honour warranties and provide service support and spare parts to current Hummer owners," a spokesman said.

The collapse of the deal represents another setback for GM, which had been working to shed unprofitable brands and focus on its four core brands - Chevrolet, Cadillac, Buick and GMC - after emerging from bankruptcy in July.

Closure of Hummer would put about 3000 jobs at stake, including manufacturing workers, dealers, staff members, and other areas, GM spokesman Nick Richards said. The brand has 153 US dealers.

A brand that grew out of the US military multipurpose vehicle known as the Humvee produced by AM General, Hummer was lauded early on for a tough image but became synonymous with gas-guzzling excess when consumers became more interested in high oil prices and environmental responsibility.

Environmentalists cheer

The prospect of the last Hummer rolling off the assembly line, though, drew cheers from local environmental organisations.

''The Hummer looks like a tank and moves like a tank and in the emerging global low-carbon economy, these types of gas guzzlers will increasingly be left out in the cold,'' said John Connor CEO of The Climate Institute.

Mr Connor said the Australia economy risks becoming the ''Hummer of the future'' unless it switches to a more competitive low-carbon footing.

Unloading Hummer was part of GM's plan to halve its US brands to four from eight, Bloomberg News reported. The Detroit-based automaker sold its Saab unit on Tuesday, and absent a last-minute buyer Hummer will join Saturn and Pontiac in being shut as GM focuses on its top-selling domestic vehicle lines.

''We are beginning the wind down of the brand, which will take several months,'' Nick Richards, a Hummer spokesman, said today. ''If there are viable alternatives for all or part of the brand during wind down, we will consider them.''

Tengzhong was ''unable to obtain clearance of the transaction from the Chinese regulators within the proposed deal time frame,'' according to a statement from the automaker.

A Chinese government agency indicated that it wouldn't give approval for Chengdu-based Tengzhong to buy Hummer, said three people briefed on the deal, who asked not to be identified because the talks weren't public. Wang Chao, China's assistant commerce minister, said today that China didn't block the bid.

Out of line

China's government is promoting small cars by reducing the sales tax on those with 1.6 liter engines or below, compared with the military-style Hummer that can weigh as much as 7,600 pounds (3,400-kilograms). The version sold in Australia was typically the 2200 kilogram model.

''It's only normal for the Chinese government not to approve the deal,'' said Lin Huaibin, a Shanghai-based analyst for IHS Global Insight. ''To allow this type of vehicle on a large scale isn't in line with government policy.''

China is encouraging automakers to build more fuel- efficient cars, including hybrids, to help win sales overseas and to reduce oil imports and pollution at home. The 3.7-liter Hummer H3T gets 14 miles to the US gallon in city driving, according to the US Environmental Protection Agency.

Incentives for smaller cars combined with rural subsidies boosted nationwide sales in China last year to 13.6 million, helping it supplant the US as the world's largest auto market.

Tengzhong has said it wants to extend Hummer into China and other expanding markets outside the US, which accounted for about two-thirds of the brand's sales under GM. It also wanted to target more fuel-efficient model to revive the sport-utility vehicle brand, Chief Executive Officer Yang Yi said in June.

GM bought the license for the Hummer brand from AM General in 1999 and started selling the $US140,000 H1, an SUV patterned after the all-terrain military vehicle popularized for road use by actor Arnold Schwarzenegger, now California's governor.

While the H1 never sold more than 875 units a year, the model won enough of a following for GM to add the 6,600-pound H2 in 2002. The 4,700-pound H3 followed in 2005. GM also started building the H3 in South Africa in 2006 for Europe, the Middle East and Africa.

Rising fuel prices eventually eroded demand. GM halted production of the H1 in 2006 as sales dwindled.

Third failure

This marks the third sale of a GM brand that has fallen through or been abandoned by the automaker, which was restructured in bankruptcy last year, backed by some $US50 billion in US taxpayer funding.

A tentative deal reached by GM to sell its Saturn brand to Penske Automotive Group also collapsed at the end of September, just before it was expected to close.

GM also scrapped a plan to sell its Germany-based Opel unit to a group led by Magna International last year.

The wind-down of Hummer is expected to take several months and GM will continue to entertain viable offers early in the process, Richards said.

GM put Hummer up for sale initially in summer 2008, a full year before the automaker fell into a government-supported bankruptcy reorganization in which it planned to divest Hummer, Saturn, Saab and a controlling stake in Opel.

Hummer's US sales have plunged to just above 9,000 last year from nearly 56,000 in 2007. About two-thirds of its sales have been in the United States and one-third internationally.

Bloomberg News, Reuters with BusinessDay's Chris Zappone