Dropping Hummer H1 Shrewd Business Move

Jerry York in January advocated General Motors cut the Hummer brand loose.

Instead of following the advice of the newest board member, GM recently announced it would stop selling the H1 Alpha flagship at the end of the ’06 model year to focus energy and resources on growing the brand.

It is a shrewd move on many levels.

The iconic H1 is a slow-selling tank that drives like a school bus; is subject to mechanical problems to the extent many enthusiasts flatbed the $126,000 toy to the off-road site; and is becoming a poster child for fuel-guzzling and politically incorrect SUVs.

Even the smaller H2 is losing some of its sales luster.

The excitement in the brand is being generated by the midsize H3, the newest, smallest and perhaps coolest member of the family, along with anticipation of an H4 to come and maybe a pickup variant of the H3.

The potential offered by the new models and the distinctive shadow Hummer casts warrant GM’s retaining the brand.

But arguments for keeping the H1 are few and far between.

U.S. sales through April sat at 98 units, with a 279 days’ supply in inventory and nothing to suggest a sales upsurge anytime soon. Hummer discontinued sales in Canada after the ’04 model year.

And the business case was unwieldy.

GM bought the marketing rights to the Hummer name from AM General in 1999 – but AM General retained control over the design, engineering and assembly of the H1.

When the H2 entered the scene in 2002, GM oversaw design but relied on AM General for assembly.

It was not until the H3 that GM claimed full control: design, engineering, assembly in a GM plant, marketing and sales.

The last H1 Alpha will roll off the line in Mishawaka, IN, this month, and the plant will produce military Humvees only, fulfilling a current military contract that runs through 2007, and likely beyond.

Hummer says it will continue its strategy of offering a performance, or Alpha, version of its models, starting with the H2, which will reign as the brand’s new flagship.

The H2 is big and bad enough to retain brand roots that date back to 1983, when the American military introduced us to the Humvee that eventually would put on civilian clothes as the original Hummer in 1992.

Hummer officials say all future models will be true off-road capable trucks – no car-based models of any size.

The brand has proven cachet and drawing power. Two-thirds of Hummer buyers are new to GM, or returning to the fold, the auto maker says.

And converts will be sought worldwide, as GM has invested in a plant in South Africa to build the H3 for global export.

Most importantly, Hummer is profitable, something that cannot be said for all GM brands.

Yes, dropping the H1 albatross and investing in new, smaller models and global distribution is a distraction, as York warns.

But it just might prove worth the effort.

[email protected]