By Eric Peters on 6.12.08 @ 12:07AM
Is General Motors next?
The Hummer is history.
GM is desperately looking for a place to unload the brand that,
literally, almost no one wants anymore. Even the littlest Hummer --
the H3 -- has become a hard sell in an era of $4 per gallon regular
unleaded.
Total Hummer sales (all models) have fallen to a dismal 10
percent or so of what they were at the height of the cheap gas
bubble -- 75,939 units circa 2005-2006 -- and GM probably feels
like a farm dog with a dead chicken tied around its neck right
about now.
The scent of death was in the air as long ago as 2006, when GM
dropped the hugest Hummer, the military-based H1 that Arnold used
to parade around in. That year, only 376 were sold -- a canary in
the coal mine if ever there was one.
GM should have taken the hint -- and folded the entire Hummer
line right then. Instead, it tossed a V-8 into the formerly in-line
five-cylinder powered H3 -- apparently figuring that just what the
market wanted was even worse gas mileage.
Sales of the littlest Hummer have predictably tanked.
Ditto the second-largest Hummer, the Chevy Suburban-based H2. GM
has managed to get rid of only about 3,000 of them so far this year
-- $100 fill-ups and 15 mpg have become about as appealing as a
saggy 60-something Arnold in a speedo.
Three years ago, GM might have shaken some loose change out of
Hummer. Too late for that now. There will be layoffs and plant
closings -- and tax write-offs.
HUMMER OWNERS themselves (the few, the proud, the profligate) will
be left to rumble around in their outre modern-day equivalents of
chocolate brown metallic, landau-roofed '68 Sedan de Villes circa
1975: ungainly relics of a time still within living memory but
fading fast.
You'd see one of the old dreadnoughts every now and again, turn
to look, and marvel at the spectacle. Did people really drive those
things?
For GM, the Hummer's demise is more serious. Because it's not
just Hummers that are going away but in all likelihood, just about
every vehicle that's like them. And with that goes GM's -- and
Detroit's -- profitability.
The whole business is built on big SUVs and pick-ups. GM hasn't
made money on small cars in years. Maybe a few hundred bucks per at
the retail level. Inside the biz, such cars were referred to with
great contempt as "loss leaders" -- and built for the sole reason
of making GM's overall fuel economy track record look a little bit
better than it would have otherwise.
No, the money was in big SUVs -- which had profit margins (at
peak) of several thousand dollars per vehicle. There was more cash
to be made selling one GMC Yukon Denali than half a dozen Chevy
Cobalts. Who could resist such a mountain of cash?
Not GM (and not Ford, either). That's why Detroit spent the '90s
cranking out as many big SUVs as possible -- and thinking up new
models that would be even more colossal, and profitable, while
relegating small car development to some distant, hopefully
never-to-arrive manana.
THUS IT HAS COME to pass that GM, Ford, and Chrysler all find
themselves several days late -- and as a result, many dollars
short. All three have reported double-digit downturns lately.
GM is throttling back its total truck/SUV production capacity by
more than 700,000 vehicles annually -- which is huge. But then, so
is the $38.7 billion GM lost last year. The automaker hasn't made a
net profit since 2004.
And it's bound to get worse the higher gas prices go -- because
all three lack top-tier small cars and are still playing catch-up
on the hybrid and electric vehicle front.
GM, for example, has a plug-in electric car (the Volt) on the
way. But it won't get here for another two years. And reports are
that GM will want $40,000 a copy, too.
Two. Years.
Meanwhile, arch-nemesis Toyota has been selling its Prius hybrid
for ten years now. It has a fleet of highly successful small cars
-- and is literally swimming in black ink. Industry watchers
believe Toyota has enough cash lying around to buy the corpse of GM
and pick its bones clean.
Sic gloria transit mundi.
topics:
Business, Military
