With a 60% share in General Motors, the U.S. Government hasn’t exactly been shy about asserting company-wide changes. In March, the President’s administration ousted then CEO Rick Wagoner, and just recently we learned about GM’s strict expense and travel policy that brought them into compliance with other bailed-out businesses. Would it be so crazy to believe that the U.S. Government isn’t allowing GM to produce any HUMMER models for U.S. consumption until later in the year while allowing GM to produce HUMMERs for international markets? That is the case according to a source within General Motors.
What caught our attention was that the GM plant in Shreveport, LA is currently producing HUMMERs, but dealers in the United States have been told they are still months away from getting units – forcing many dealers to buy and ship vehicles from around the country just to keep up with local demand. As it turns out, the HUMMERs in production are destined for Mexico and Canada – two markets that, even combined, would have less demand for the HUMMER than the U.S. market.
GM may point to the “days supply” of HUMMERs in the United States and say more production isn’t needed. However, if you’re on the fence about buying a HUMMER vs. another competitor, and the dealer tells you in order to get the vehicle you want it will take two weeks, and an extra $1500 to ship two vehicles across the country (smaller dealers that only have 3 or 4 HUMMERs left are only interested in trading to other dealerships, not selling, since they don’t want to be left with empty lots and no certainty of when they will have more inventory), which would you choose?
Selection is down and prices are up, making it impossible for dealers to stay competitive in the marketplace – driving sales down and thus increasing the “days supply.”
It appears that the U.S. government is worried more about the perception of public tax dollars going to a company that produces HUMMERs rather than actual dollars and sense. After all, HUMMER is a profitable brand for General Motors. Why then, if there is production capability, demand from dealers, and more money coming into the automaker is the U.S. Government not allowing GM to produce HUMMERs until later in the year, presumably after a sale to a Chinese company is finalized?
Politics, perception, and reelection.
GM isn’t the only company the political decision is hurting. With an average dealership staff around 12, and the largest employing around 50, it’s tough to keep the doors open and employees fed when you don’t have the products your customers are asking for.
The U.S. Government needs to realize that HUMMERs are a niche vehicle that has a niche market. Albeit smaller than the market for many other vehicles, the company still has the chops to stand on its own and be profitable. That is, if the bureaucrats in Washington don’t run the brand into the ground first by artificially limiting the supply for political reasons.