“HUMMER”: GM Drops the Bomb

From HUMMER: How a Tiny Truck Company Hit the Big Time, Thanks to Saddam, Schwarzenegger and GM, by Marty Padgett. Motorbooks International, 2004, $16.47

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HUMMERIn the auto industry, news is a controlled substance. So when General Motors decided it was time to tell the world it had acquired the rights to sell HUMMERs, the automotive press lined up, anxious to hear the latest news in a string of binge-acquisitions that had taken place over the previous two years.

GM was facing image problems, but it had the bandwidth and the bank balance to do something with the Hummer nameplate. And they were willing to strike a deal that left AM General with the family jewels intact —its lucrative military contracts. As talks progressed, GM agreed to help finance a new plant on AM General’s turf to build the new consumer HUMMER. The plant would become the property of AM General should the deal expire. Best of all, AM General could dip into GM’s vast parts bin to buy more up to date engines for the Hummer, like GM’s 6.5-liter diesel and its more powerful V-8 gas engines.

Soon enough, Armour and GM’s team of executives had locked down the terms of the deal. GM would get the rights to sell Hummer-brand vehicles for seven and a half years, while AM General would continue to build military trucks and build the new GM-derived vehicle, too. Both would survive and prosper. In August 2000, construction began on the new plant at AM General’s compound in Mishawaka; by December 2001 HUMMER H2 pilot vehicles were rolling off the assembly line, for an on-sale date of July 2002.

Certainly AM General would benefit from the deal. GM had seemingly engineered profits without much of the risk associated with buying all of AM General. HUMMER could bring General Motors $15,000 in gross profit per vehicle, adding $500 million to the company’s bottom line if it could boost volumes to 200,000 units a year. More importantly, it could bring back customers who would never have considered another GM product outside of one with the HUMMER’s swagger and bravado.

"People don't appreciate how important Hummer is to GM," the automaker’s Vice-Chairman Robert A. Lutz told BusinessWeek. "It's going to be a big moneymaker."

The 2000 North American International Auto Show literally was the beginning of a new millennium in car design.

“It was a big product show,” Cherry says. “The year 2000 was the future —people would talk about it in books—and because of the historic importance, I wanted to show a concept for each one of our divisions.”

Beginning at the Tokyo Motor Show in 1999, where the Chevrolet Triax was unveiled, through the Detroit show to the New York International Auto Show in April 2000, GM did just that, previewing the future of its divisions through concepts.

The Detroit show, however, eclipsed all. GM staged its press conference in a vast corner of Detroit ’s Cobo Hall in a multi-level display costing tens of millions of dollars. After running through the other divisions and closing the curtain as if the show were over, those who headed out early to grab seats at the next press conference missed the debut of the hour. The curtains opened once more and the HUMMER H2 concept appeared in screaming-yellow.

"We're going to produce an all-new HUMMER and it will look a lot like the H2," hinted Ron Zarrella, president of GM's North American automotive operations. Not only that, the vehicle would be in production within two years, he said. That was astonishing quick for the company generally reputed as the slowest in Detroit.

The H2 concept fought for attention, but in a hail of new concepts and new products that included a slinky F-Type from Jaguar, the Chevrolet Avalanche, the new MINI Cooper from BMW, and the Norwegian-bred eco-TH!NK car from Ford, the HUMMER got its due as one of the most important concepts on the floor that day. In GM’s words, it was “an authentic evolution in a truly incomparable species.”

GM’s timing couldn’t have been more dramatic. HUMMER designers worked on concepts at home to keep the news from leaking out. It mated HUMMER proportions to a Chevy Tahoe chassis and were literally taping ideas together as the stage lights came on in Detroit on January 9, 2000. It was the first auto show of the new millennium. GM and AM General took HUMMER off into more uncharted territory as the H2 Vision concept took the stage. Cameras clicked and the concept did, too, with Detroit ’s harsh press corps, which murmured approval as Zarrella promised the world a new HUMMER.

The announcement of the deal neatly capped the wave of consolidation just about to draw to a close in Detroit . All the good brands had been snapped up, and when GM announced the HUMMER deal in January 2000, it met with whistles of approval. Normally staid GM was rewarded for the bravado of buying into an unestablished but gold-star brand and by unveiling its H2 Vision concept, maybe the butchest looking truck at the Detroit auto show. GM framed the deal as a win-win for it and AM General—and then sat down to the business of putting HUMMER to work.

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