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Hummer extends dealers' franchise agreements as it mulls suitors

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Hummer extends dealers' franchise agreements as it mulls suitors

Jamie LaReau

Automotive News -- February 26, 2010 - 2:52 pm ET

DETROIT -- General Motors Co.'s is extending the franchise agreement by 60 days for the remaining 153 U.S. Hummer dealers while the automaker continues to look for a buyer.

The extension, which went into effect today, gives Hummer leaders until May 1 to either sell the brand, extend the agreements to continue shopping it, or wind it down, said Hummer CEO Jim Taylor in an interview with Automotive News.

“We're going to do everything in our power to bring this home in the next couple of months,” Taylor said. But he added: “GM's intention will be more than fair in the wind down process if we get to that stage.”

There are “several” parties interested in purchasing Hummer, Taylor said.

Chinese regulators declined to approve the sale of Hummer to Chinese manufacturer, Sichuan Tengzhong Heavy Industrial Machinery, earlier this week.

Move fast!

Taylor was reluctant today to characterize his optimism in finding a new buyer for Hummer.

“The next step in the process is to sit down with those interested parties and figure out who is serious and who just doesn't make any sense,” Taylor said. “Some are well-known equity houses, who do this for a living. Some are just those who say, ‘I want to buy it.'”

Taylor is under orders from GM's CEO Ed Whitacre to “move fast,” Taylor said. Whitacre did not give Taylor a specific timeframe to get a sale done or pull the plug on Hummer. But Taylor hinted Hummer would likely follow the Saab sale timeframe of about 60 to 75 days.

“We're not going to take seven months to a year to do this,” Taylor said. “I call it very fast speed dating. We have to look at each other, see if we like each other and then get it done very quickly.”

How a wind down would work

If GM can't find a suitable buyer for Hummer by May 1, it can either extend dealers' franchise agreements another set amount of days or wind down the brand, Taylor said.

Hummer dealers already have wind down agreements, but GM has not invoked them.

Taylor said a wind down process would mimic that of GM's Pontiac and Saturn brands.

“The amount of retail support in terms of incentives and advertising was very fair and so if we enter this wind down process it'll be very orderly and with GM's support,” Taylor said. “It won't leave dealers in a world of hurt.”

GM stopped production on the H3 SUV and H3T pickup on Jan. 13. There are currently 2,521 H3 and H3T trucks in stock.

“We've been very conservative in the amount of volume we produced because we didn't know for a long time if we'd live or die,” Taylor said.

Dealers will each get financial compensation in the event of a wind down, Taylor said. The amount is already set in each pending wind down agreement, and varies based on several factors unique to each dealership.

Dealers vital

Since GM announced Hummer was under strategic review in June 2008, Hummer has lost less than 10 dealerships in the U.S., Taylor said. He insists that strong dealers are key to making Hummer an attractive asset.

Hummer placed first among affordable brands in terms of how customers feel about their experience with dealerships' service departments, according to a J.D. Power and Associates' annual Customer Service Index study released this week.

Taylor said he will give Hummer dealers weekly updates on his progress in selling the brand.

“We've been very fortunate that almost through two years, dealers have hung in with us,” Taylor said. “It's vital to the sale”

Hummer's U.S. sales peaked at 71,524 in 2006, before demand was choked by gasoline prices that soared above $4 per gallon in 2008. Sales last year dwindled to 9,046.

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