GM expects to give potential buyers financial information about Hummer

Posted by admin | Hummer H2 | Monday 15 September 2008 2:44 pm

General Motors Corp expects to give potential buyers financial information about Hummer in the next few weeks while also looking at other asset sales, Chief Operating Officer Fritz Henderson said on Monday.

GM, which in June hired Citigroup to consider all strategic options for Hummer, has not yet officially put the iconic gas-guzzling brand on the market.

Even as GM executives have publicly said they have received indications of interest in the brand, likely buyers from India, China, Russia and the Middle East have denied interest.

A credit crunch that began last summer has severely limited access to borrowing money, especially for private equity players, making large deals very difficult.

“Private equity, which was a source of capital, has really curtailed its appetite with concerns about credit,” Henderson said at the Reuters Autos Summit in Detroit. “Ultimately someone has to buy assets in order to sell them, and there has been a dearth of buyers.”

Still, Henderson said GM was not delaying the sale process of Hummer to wait out the downturn. “I would like to reach a conclusion on this relatively promptly because taking a lot of time doesn’t help.”

Henderson said there was no deliberate delay and that the auction had not yet begun because “doing stand-alone financials takes time.”

While he said he would like to see a decision on Hummer by the end of the year, he does not see a sale closing before 2009.

Interest in buying a brand that gets only 9 to 15 miles a gallon has been scant and continues to shrink as gasoline prices squeeze drivers worldwide and environmental concerns increasingly trump any other notion of what’s cool.

Sources familiar with the matter have said GM has had initial exploratory talks about Hummer with Indian automaker Mahindra & Mahindra Ltd and Russian oligarch Oleg Deripaska.

But both parties have publicly denied interest.

Hunan Changfeng Motor Co also said it had held preliminary talks with GM, but the Chinese SUV maker backed off after touring Hummer’s U.S. factory, citing limited potential to market the vehicle.

And after Terry Johnson, GM’s managing director for the Middle East, said two investors in the Gulf Arab region had made overtures, the three most likely candidates — Abu Dhabi’s Mubadala, Kuwait’s Investment Dar and Dubai Investment Capital — denied interest.

“It’s an interesting and iconic brand, and our timing was poor,” Henderson said, referring to GM’s launch of the Hummers in the U.S. market.

The original Humvees were multipurpose, off-road military vehicles, but maker AM General launched Hummer for civilians in 1992. GM bought the brand in 1999, near the peak of truck sales, and went on to sell the H1, H2 and H3 models.

But as oil prices have risen, sales have plunged. U.S. demand — accounting for the bulk of all Hummer sales — was down 44 percent through August.

GM, which lost more than $51 billion in the past three years, has said it will try to raise up to $4 billion through asset sales.

Henderson said the automaker is also considering sales of other assets at this time.

Some analysts have said GM could sell its OnStar unit, which specializes in in-vehicle communications and safety technology. Henderson declined to comment.

But some investment bankers have said GM will probably get more money from capital markets than from asset sales as it seeks to raise $5 billion from a combination of both those efforts.

“We could very well sell debt,” Henderson said. “But trying to do even a secured financing deal in this market is pretty tough.”

General Motors COO Fritz Henderson spoke to reporters at a press conference in Detroit today and laid out a few more details on the planned sale of the Hummer brand. In a less-than-shocking admission, Henderson conceded that, while he’d like to see a decision made by the end of the year, no actual sale is likely until some time in 2009. As it has affected every aspect of the economy lately, the credit crunch has also impacted private equity buyers’ ability to borrow money, making large deals like car brand buying difficult to accomplish.

“Private equity, which was a source of capital, has really curtailed its appetite with concerns about credit,” says Fritz Henderson. “Ultimately, someone has to buy assets in order to sell them and there has been a dearth of buyers.”

Henderson assured reporters that GM was not intentionally delaying the sale to ride out the downturn in the auto industry and that he’d prefer to see Hummer gone sooner rather than later. For now, GM is working on getting all of Hummer’s financial documents together so it can present them to potential buyers, whomever they may be, in the next few weeks. The General also is looking at what other assets it can sell as it tries to generate $4 billion from sales as part of its $15 billion restructuring plan.

Henderson also noted that GM is facing slower sales in China and Europe as well, which isn’t helping the restructuring plan. On the other hand, he has hope that we may have seen the lowest point of the U.S. market over the summer.

“It feels like all the negative variables are factored into the market, are factored into the consumer,” says Henderson. “Perhaps we have found the bottom … in the U.S. I can’t say the same thing for other markets.”
2009 Hummer H2 SUT

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