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Oracle of Delphi

Hummer: Bonuses, buyouts

10 posts in this topic

Craig Trudell

Automotive News

July 28, 2008 - 12:01 am ET

With its dealers struggling to sell vehicles from a brand that might be sold, General Motors has paid Hummer dealers early bonuses and is in talks to buy out stores.

"Hummer is quietly getting dealers to sign off on their stores and making deals with each one," Tim Kelly, a Hummer dealer in Chattanooga, Tenn., told Automotive News.

Kelly said GM is "tiptoeing through a legal minefield" by trying to shed Hummer, trying to avoid the lawsuits that ensued when it killed Oldsmobile. He said he doesn't think that dealers "are going away without a fight, but I think GM is handling it the right way by making peace with each dealer, one by one."

In early June, GM had said it was considering "all options" for Hummer, including sale of the brand. Last week, a GM spokeswoman wouldn't say whether GM is making bonus payments or is buying out dealers.

But several dealers confirmed that GM is buying out stores from owners. One owner said he is holding talks with GM about selling his store but had signed a confidentiality agreement.

GM came to dealers' aid after putting Hummer on the chopping block. GM tweaked its Standards for Excellence bonus program, paying Hummer dealers second- and third-quarter bonuses in advance as if they already had achieved them.

The bonuses were paid based on dealers' performance in the second and third quarters of 2007. While the amount paid differs among dealers, the average bonus is at least six figures, dealers said.

The bonuses paid under the program "can be substantial," said Ed Williamson, a Miami dealer. Williamson said GM made the changes to get its dealers through a sales plunge. In June, Hummer's U.S. sales fell 59.3 percent to 2,072 units.

Williamson's store, Williamson Cadillac-Hummer, sold 31 Hummers in June, tying for the top-volume dealership in the country for the month. When business was at its best in 2006, Williamson averaged more than 100 new Hummers a month.

"There's no question that there are some people out there that might have considered our truck," Williamson said of consumer attitude in recent months. "If they're thinking GM is going to sell it, they might not have come in to look."

Adding to their struggles, dealers said, much of their best sales staff fled their Hummer lots after GM put the brand up for sale. Hummer dealer Mike Daugherty said he cut his sales staff in half since GM started shopping Hummer.

Daugherty said $4-a-gallon gasoline took away about half the business at his Hummer store in Sacramento, Calif. The other half disappeared after GM announced it might sell the brand.

Link: http://www.autonews.com/article/20080728/A.../807280338/1078

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Didn't GM just encourage Hummer dealers to spend a lot of money renovating the showrooms to a common design?

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Good GM Strategy.

1. Tell people that brand is for sale yet say everything is on table to be considered. The smoke screen strategy.

2. Put fear factor in the minds of the people and dealer (salespersonnel fleeing).

3. Negotiate at a lower price and avoid embarrassment aka Oldsmobile style.

Now I am really wondering if they are going to sell or just shut the brand down.

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This works. Does the 2008 H2 have a six speed auto with the 6.2? Anyways or just even cutting down your dealerships would be good.

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Wouldn't it be cheaper to kill the HX/H4 and let each dealership slowly go bankrupt because they have nothing but big, heavy trucks that people dont seem to want anymore? Maybe not if you're going to sell the brand, but if you intend to kill the brand outright, that would be the way to go. They cant sue if they've already closed.

Edited by Satty
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Didn't GM just encourage Hummer dealers to spend a lot of money renovating the showrooms to a common design?

Well, of the couple of Hummer dealers I know in central & southern NJ, none have made a separate selling dealership for their Hummer franchise. The most notable Hummer dealer I know of, Perrine Buick-Pontiac-GMC-Hummer-Saab in Cranbury, NJ, always had Hummer as part of their regular, combined vehicle showroom. I believe back in '03 or '04 they cleared some trees on their land to make an off-road driving course (at least that is what I was told they were building), but nothing ever materialized and it's just an open spot in the wooded area (used for overflow parking for their June car show).

I am sad to see Hummer go before more smaller models were introduced (Hx/H4). I really loved the Hx Concept when I saw it at the NYIAS this past March and could see myself owning one if they were available next year. I was really pulling for that (Hx/H4) and the GMC Denali XT concepts to make it to production, and now it seems as if GM is letting me down :thumbsdown:

What would be nice is if GM offered the Hummer Hx/H4 to GMC, rebadge it, and allow GMC to sell it as competition for the Jeep Wrangler and Toyota FJ Cruiser. At least it wouldn't go to waste. Another thought - if GM does sell the Hummer brand, does that mean the concepts go with it, they get scrapped, or they remain in the GM Design Center's collection? (I'm talking about the 1999 H2 concept, the 2001 H2 SUT concept, Arnold's hydrogen-powered H2, and the Hx concept)

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Wouldn't it be cheaper to kill the HX/H4 and let each dealership slowly go bankrupt because they have nothing but big, heavy trucks that people dont seem to want anymore? Maybe not if you're going to sell the brand, but if you intend to kill the brand outright, that would be the way to go. They cant sue if they've already closed.

One way the dealerships can argue against this strategy is by suing GM on the basis that GM did not "nurture" the brand and if proven in the court that GM set its investment $$$ to other brands while starving Hummer, dealers will have a case and it may get ugly.

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It would be cool the keep the brand around if we could. The H3 is not a bad vehicle, and the development work is pretty much done on the H2.

Kinda like the idea of an H4/Wranger competitor...

That being said, the writing is probably on the wall.

Chris

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