Interest likely to be tepid in Hummer sale

By Jui Chakravorty Das

NEW YORK (Reuters) - General Motors Corp's (GM.N) iconic Hummer brand could fetch up to $750 million in a sale, but would likely generate little interest and the company would probably have to look overseas to attract even a few buyers.

GM, the largest U.S. automaker, said on Tuesday it is reviewing its Hummer brand and could sell the SUV line, which has become synonymous with gas-guzzling excess and has hurt GM's image at a time when consumers are demanding more fuel efficiency.

"At this point we are considering all options for the Hummer brand, everything from a complete revamp of the product line up to a complete sale of the brand," GM Chairman and Chief Executive Rick Wagoner said.

But as oil prices touch all-time highs, interest in buying a brand that provides 9 to 15 miles a gallon in fuel efficiency will be thin.

Some bankers said possible buyers could come out of Russia, where Hummer has a strong cache, and countries such as India and China, where automakers are looking to get a foothold in the U.S. market.

Still, even for those buyers, Hummer's biggest strength is its biggest weakness: it is a niche model with a limited product line.

Hummer makes bold sport utility vehicles that start at roughly $31,000 and go up to about $65,000. The brand was originally conceptualized as a multipurpose, off-road military vehicle, and created what came to be known as Humvees for the U.S. military. Those were made by a company called AM General.

GM bought the Hummer brand from AM General in 1999 and went on to sell the H1, H2 and H3 civilian models that became the symbols of toughness and coolness.

California's governor, Arnold Schwarzenegger, added to the image by boasting of a fleet of eight Hummers. He brought the brand into every American living room when he famously referred to it while debating rivals during the gubernatorial race.

But as oil prices have risen, Hummer sales have fallen. U.S. demand -- which comprises the bulk of total Hummer sales -- has plunged 30 percent so far this year. Even the "Governator," as Schwarzenegger was dubbed, has sold his fleet.

And with increasing environmental concerns, the image has quickly gone from cool to not-so-cool.

"It's a very clear-cut, incredibly well-defined and very strong brand name," Catherine Madden, senior automotive analyst for Global Insight, said. "It's also a very high profit-margin vehicle line. But those profits could be marginalized significantly because of a segment shift in vehicle purchases."

With fuel prices at about $4 a gallon across many parts of the United States, consumers are increasingly turning to fuel-efficient vehicles.

"For foreign automakers looking to enter the U.S., it is not a very attractive asset because it brings them into the market with a product that consumers are shying away from," Argus Research analyst Kevin Tynan said.

Analysts and bankers don't see Ford Motor (F.N) or Chrysler, now owned by Cerberus, showing an interest. "Both are overloaded with products that consumers are shifting away from and both are in precarious positions themselves," Madden said.