Two Gulf Arab investors have expressed interest in buying General Motors Corp's Hummer 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 Chief Executive Rick Wagoner said on August 21 the automaker 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. "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. Luxury sports cars, gas-guzzling SUVs and tank-like Hummers all jostle for space on Gulf highways, where the oil-rich economy has been buoyed by a more than fivefold rise in crude prices since 2002, unlike in the West where drivers have been hit by soaring fuel costs.
Gulf Arab states and companies spent about $60 billion on foreign assets last year, almost double the previous two years combined. In the auto industry, Abu Dhabi's Mubadala Development Co bought a 5 percent stake in Ferrari in 2005, while Kuwait's Investment Dar last year bought half of Aston Martin.
Dubai International Capital, which bought a $1 billion stake in DaimlerChrysler in 2005, said in May last year it had sold all its shares in the automaker. 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.
Earlier this month, automakers from India, Russia and China backed off after holding exploratory talks on the brand according to sources familiar with the matter. Selling off the division that makes the famous road hog would likely do more to address GM's reputation for building gas guzzlers than improve its cash position. Making vehicles that average between nine and 14 miles per gallon, Hummer is not a particularly attractive asset as gasoline prices squeeze drivers and environmental concerns increasingly trump any other notion of what is cool.
Modelled on US military vehicles widely deployed in the Gulf War in 1991, the Hummer sports utility vehicle (SUV) made its debut shortly after that time, when US gasoline prices were less than half what they are now. The Gulf would be a viable option, however, since 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." Detroit automakers in general have been hit hard by a dramatic shift in buying to passenger cars and more fuel-efficient, car-based SUVs in the US market, the world's largest, forcing them to restructure.