General Motors Corp said it had reached a preliminary deal to sell its Hummer brand, part of its effort to shed half of its eight U.S. lines and leave bankruptcy court protection as a leaner company.
GM, one day after filing for bankruptcy, said in a statement on Tuesday that it was not disclosing the buyer or the value of the deal under the terms of the agreement.
The buyer is “serious,” Chief Executive Fritz Henderson said on CNBC, and he expects details of the transaction to become public “in the relatively near term.”
The Hummer sale comes a year after GM started searching for a buyer for the all-SUV line more emblematic of stronger economic times, when the cost of gasoline was not much of an issue.
The automaker is also in the process of selling its Saab and Saturn brands by the end of 2009, and plans to discontinue Pontiac by the end of 2010. GM has said it will focus on the Chevrolet, Cadillac, GMC and Buick brands, which make up more than 80% of current sales.
GM said the Hummer transaction was set to close by the third quarter of this year and should secure more than 3,000 jobs in manufacturing, engineering and at Hummer dealerships around the United States.
THOSE WERE THE DAYS ...
Hummer is famous for making very large sport utility vehicles that cost roughly $31,000 at the low end and go up to about $72,000 with options.
First seen as multipurpose, off-road military vehicles, Hummers were originally built by a company called AM General. Its first model was the Humvee, for the U.S. armed forces.
GM bought the Hummer brand from AM General in 1999 and went on to sell the H1, H2 and H3 civilian models that became a symbol of coolness.
California Gov. 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 rose, Hummer sales collapsed. U.S. demand - which comprises the bulk of total Hummer sales - has plunged 30% so far this year. Even Schwarzenegger sold his fleet.
GM's deal to sell the brand includes plans by the unnamed investor to aggressively fund future Hummer product programs, according to the automaker.
Under the proposed deal, Hummer will continue to contract vehicle manufacturing and business services from GM during a defined transition period.
Also, GM's Shreveport Assembly plant would continue to contract assemble the H3 and H3T through at least 2010.
BUYING THE BRAND
In court documents filed on Monday, Henderson said the automaker had expected Hummer to fetch more than $500 million when it went up for sale in June 2008, but the sale could not proceed on “reasonable terms” due to tight credit and concerns about the automaker.
Investment bankers have said Hummer would fetch about $100 million in cash, down from initial expectations of $500 million to $750 million.
Hummer's valuation has suffered because of the weakening economy, continued tightness in credit markets and a lack of interest. The overall value of automotive assets has also declined dramatically over the past year.
GM sold about 27,485 Hummers in the United States in 2008, down 51% from the previous year.
In early April, sources told Reuters that three bidders were in the running for Hummer, and that none were automakers.
The bidders included private equity and wealthy individuals, the sources had said, adding that one was from the United States, and the other two were from overseas.
GM shares were down 12% at 66 cents in morning trading on the Pink Sheets. (Reuters)