Marketing: "Like Nothing Else"
Brian Siegel Marketing SBU: Hummer
“Like nothing else”
Look, it’s a truck, a car, a luxury vehicle, all terrain, sporty SUV?! As the General Motors (GM) slogan goes for their Hummer product line, it’s truly “Like Nothing Else”! There are Sport Utility Vehicles (SUV) that come close, but not similar in comparison. Main competitors include the Lincoln Navigator (Ford), Range Rover, Lexis LX 470, and smaller SUV’s such as the Ford Explorer, Jeep, Toyota, Land Rover, and Nissan. GM’s Hummer started as a concept vehicle for the military, and eventually became marketed and distributed to the mainstream.
The Hummer is manufactured by AM General. The origins of AM General can be traced back to 1903, in Terre Haute, Indiana, where it started manufacturing bicycles, and expanded to the Overland Automotive Division to manufacture motor vehicles. In 1908, John North Willys purchased the motor division. Under Mr.Willys direction, the company started manufacturing the “Whippet” car, and became Willys-Overland Motors Inc in 1936. In the 1940’s, they manufactured America’s first 4 wheel drive vehicle, the famous “Jeep”. As the Hummer has been taken mainstream, the Jeep line started the trend from military to civilian vehicle during this time. The company was purchased by the Henry J. Kaiser interests in 1953, and in 1960 Wills Motors, Inc began the first civilian government program by producing and developing a ½ ton delivery van for the United States Post Office, and eventually produced 14,000 of them. In 1963, the company was renamed Kaiser Jeep Corporation, and in 1964 purchased the Studebaker Corporation manufacturing facilities in South Bend, Indiana where they produced 112,000 5-ton and 150,000 21/2-ton trucks for the United States military. In 1967, Kaiser Jeep formed a division dedicated to the R&D for government vehicles, and awarded a contract by the US Post Office for the ¼ ton DJ-5 Dispatcher (similar to the original Jeep), and produced over 150,000 of them. In 1970, American Motors Corporation purchased Kaiser Jeep Corporation from Kaiser Industries. In 1971, AM General was incorporated as a separate subsidiary of the American Motors Corporation, separate from Jeep Corporation. This was in order to have AM General fully dedicate itself to the needs of the government and contract fulfillment. AM General developed and patented the Central Tire Inflation System (CTI) for the M809 and M939 5 ton trucks, and also developed driver activated dashboard controls to control tire pressure for different terrain conditions while the vehicle was still in motion. This improved towing capability, and contributed to longer vehicle life and lower life cycle costs.
During the 1970’s, there was need and development of a military vehicle that was an all purpose vehicle. Specifically, the Army wanted a “high mobility multi-purpose wheeled vehicle”, or a HMMWV, M998 Series. AM General competed to develop such a vehicle for the military, and began design work in 1979 for such a vehicle. A vehicle titles the HUMVEE was the concept created. This was a 1.25 ton tuck that AM General worked on to replace the M151, which was the previous model utilized by the US military for “lighter work”. The US Army awarded AM General a contract to develop a prototype contract in 1981. In 1982, development and operational testing was conducted over a five month time span. There was much testing, on and off road. After much debate, testing, and development to meet specific standards, the United States Army awarded AM General a $1.2 billion dollar contract for 55,000 HUMVEES to be produced for the US Army. The military saw a need for more of the “Hummer” vehicle, and upped the order by 15,000 additional units. Humvees were and are used by the U.S. Army, Marine Corps, Air Force and Navy at locations throughout the United States and overseas. In 1983, the LTV Corporation bought AM General from American Motors Corporation and established it as a wholly owned subsidiary of the LTV Aerospace and Defense Company. In August 1989, the U.S. Army awarded AM General a new multiyear contract for continued production of more then 33,000 Humvees. First deliveries under this new contract began in January 1990. Total value of this second multiyear contract was approximately $1 billion. Options raised the number of vehicles produced to nearly 50,000. In 1994 the Army awarded AM General an additional contract. The latest U.S. Army contract awarded in 2000, calls for the production of up to 31,474 additional Humvees through 2007! Over 175,000 vehicles have been built and delivered to the U.S. Armed Forces and more than 50 friendly overseas nations. The tough and rugged Humvee was prominent in the U.S. military, and saw action in Panama in 1989-90, and during Operation Desert Storm in 1991, where nearly 20,000 won praise and were utilized by US troops. More recently, Humvees have played been utilized in campaigns in Somalia, the Balkans, Afghanistan and Iraq. Wherever American soldiers go, their Humvees follow. In April 1992, The Renco Group, Inc. of New York City purchased AM General Corporation from LTV.In 1992, the HUMVEE went mainstream and was produced for the general public. It was renamed its popular name as it’s known by today, the “Hummer”. It was branded as the worlds most serious and toughest 4X4, and its long life, durability, performance, and tough image was marketed. In 1999, AM General and General Motors Corporation finalized an agreement to jointly pursue product, marketing, and distribution of the Hummer. GM acquired ownership of the Hummer brand name in 1999, and the H1 was born. In 2002, the H2 followed as a more mainstream SUV focused on a larger demographic with a sleeker, smaller, yet still tough design, and also cheaper. Soon following was the H3; designers are currently working in more environmentally friendly parts, and a truck line. In April 2002, AM General was converted into a limited liability company. AM General also provides parts and training support for all its products and its Engineering and Product Development Center provides systems technical support for several military vehicle systems in addition to the Humvee. AM General, which remains an independent company and government and military contractor. GM was formed in 1908, and is the world’s largest automaker with brands such as Buick, Cadillac, Chevrolet, Pontiac, Saab, Saturn, and Hummer.
Hummer’s starting strategy was to gain the contract with the US government to manufacture and produce the tough and rugged all terrain vehicle for military, and continues so today. They wanted to develop something that the military could use for general all purpose transportation, and the Humvee was born, and manufactured by AM General. In 1992, their strategy shifted to the civilian demographic, and the H1 was produced for the public. The cost for the H1 was around $100,000! This limited the demographic the vehicle could be sold to, and Hummer targeted men over 40, with an annual household income of 175,000 dollars. This was a huge advancement and shift in market from where the Hummer originated. Originally intended only for the military, and focused on getting production and development for a government contract. The H1 was marketed as something “like nothing else”. Nothing was like it, so the marketing firm who won the 20M contract, Modernista, Boston, was right on the money. The problem wasn’t that the marketing wasn’t on the “money”, but perhaps “money” itself! The high end SUV was just that, with the cost of over $100,000, and having the money to put additional features on the H1 gets very costly, with and average cost of $10K on top of the already high end price. Other issues such as lack of fuel efficiency, size, and lack of being environmentally friendly added issues. The typical buyer makes $200,000 to $300,000 a year, says AM General. Jerry Smith.
Hummer adopted the slogan that Nike’s CEO lived by, which was “Innovate or die”. Noticing the large potential for the sales of Hummers, yet the average consumer making around $40K couldn’t afford, Hummer decided to design something that would fit the market they were missing. Hummer had already established itself as a reputable, high end, quality, and tough brand. The concept that was developed was the H2, which would cost around $50K, half that of the H1! The $50,000 H2, which went on sale in June, is the first new vehicle from Hummer since GM acquired the brand name in 1999. While the H2 did not compete directly with Jeep vehicles, a future H3 model is expected to be priced at around $30,000, posing a direct challenge to Jeep. GM expects to sell 35,000 to 40,000 H2s annually, compared with H1 annual sales of around 1,000. Chrysler / Jeep found that the grille on the H2 was very similar to their trademark design, but the courts found that H2 does not infringe on the Jeep trademark Also, the court felt that Jeep couldn't prove consumer confusion between the grille designs of the H2 and Jeep vehicles. The H2 and Hummer brand had sad, but creative marketing. Due to the military campaigns in Iraq (Gulf war in 1991) the Humvee’s were constantly on television, gaining technically free advertising from being on news programs when military personnel were interviewed, or a station such as CNN was on site covering a story. Being associated with the tough US military image, and them using the vehicle, the public viewed the Hummer brand in this manner as well. Hummer decided to implement the H2 to meet such demands due to the H1 being such a high cost. More consumers could now afford the all terrain SUV that was once out of most Americans affordability. The high cost set Hummer apart as well. Like a fine bottle of wine that costs thousands of dollars, the H1 was the “expensive wine of SUV’s”. Consumers wanted a taste of the quality, image, and popularity the Hummer would provide, and with the development of the H2, a larger demographic could now be reached! When building the H2, forty percent of the parts were taken from GM's truck line. GM parts account for about 75 percent of the value of the truck, one engineer estimated. The front suspension is borrowed from GM's three-quarter-ton full-sized trucks. The five-link rear suspension design is shared with the Chevrolet Tahoe. The engine consists of GM's 316-hp 6.0-liter V-8, which produces 360 pounds-feet of torque. The automatic transmission also is GM's. Below are some other GM parts (lowering cost margin):
Floor pan, from the Tahoe, which was patched in the middle to create the H2's 6.8-inch longer wheelbase.
Instrument panel structure, from the full-sized trucks.
Steering column, from the mid-sized Chevrolet TrailBlazer.
Frame, which was created by splicing together portions of GM frames.
This enabled the H2 to have a sticker price of $48,800, which is far from inexpensive, but well below the H1's base sticker of $109,834. As for off-road ability, the H2 can cross a 20-inch deep stream, climb a 60-degree grade and crawl over rocks as tall as 16 inches. This isn’t exact as the H1 capabilities, yet more “street friendly” and still capable of going off road. One analyst sees risks in producing a tamer Hummer. The H1 became an icon because of its ruggedness. “Part of the appeal aspect of the H1 is its sheer, mammoth size,” said Todd Turner, president of Car Concepts, a consulting firm in Thousand Oaks, Calif. “But will that translate into a far more refined type of vehicle that is more mainstream?” You lose a lot of what that appeal is about by scaling it down and making it more compatible with highways and parking lots.”GM was keen to retain the military soul of the H1 because research showed that buyers responded to the Hummer's Army roots. In 1998, DiGiovanni was doing market research on a military-looking concept truck that GM had developed before it acquired the right to market Hummers. At the time, he was head of GM's research and forecasting group in North America.GM tried various names on the concept, called the Chunk. When DiGiovanni branded/labeled it as a Hummer, buyers' response skyrocketed. They had already established great brand awareness from the originally Humvee and the H1, so it seemed fitting to maintain and focus on the quality and image of Hummer. In January 1999, DiGiovanni and his group presented the H2 idea to GM's North American Strategy Board. The board authorized contact with AM General, in Mishawaka, IN. An agreement was signed in 1999, GM purchased the rights to the Hummer name and AM General agreed to assemble the H2. The assembly contract runs through 2009. Edag Engineering and Design AG of Fulda, Germany, helped GM develop the H2 in a speedy 16 months. GM was trying to fill product gaps, shake its reputation for blandness, and feels it will do so with the H2 line, and future product lines under Hummer.
The H2 became a hit and success. Due to the innovation and success of the H2, Hummer developed a smaller truck than the H2, the H3. The H3 rolled out during the 2005 model year, was priced $30,000 to $40,000, and increased sales 43%. Underneath, H3T is powered by a 350-hp, 350-lb-ft turbocharged variable-valve version of the Colorado/Canyon 3.5-liter inline five, mated to a four-speed automatic. This provides the quality toughness/image Hummer is known for, but is not as high in price as the H1 and H2 due to smaller size. The H3 gets around 20mpg versus the 10-15mpg the H1/H2’s get. A four-wheel-drive system sends power to specialized 19-inch multitraction tires developed by GM, Nike and BFGoodrich. As far as “look”, as Hummer has grown its market and demographic, consumer taste and preference for maintaining differentiation exists. Hummer wanted to position itself in a broader market, yet with the same image. Hummer responded not only with the different product lines and features, but also with new colors such as red, yellow, and orange. These types of options and the H3 opened up the demographic that Hummer could reach. The Hummer was viewed more of an attitude and almost a way of life. A driver of the H1 vehicle that is 6 feet 3 inches high, 15 feet 4 inches long, and nearly a foot wider than the largest Cadillac stated,” I almost felt like a celebrity, going to work I would be stopped and asked about my Hummer constantly!”, a Hummer owner/driver Adare Fritz, who runs the Mishawaka, IN Hummer plant stated. “Giant front tires, twice the diameter of a passenger car's door, swell out past stumpy front bumpers. The chassis is made of massive, hollow girders. The body is made of corrosion-proof aircraft aluminum. Rivets, hundreds of them, bulge all over the surface. Thousands more dot the inside. Thick steel rings protrude through the hood and back bumper so you could, in a pinch, drop in somewhere by helicopter or even by parachute.” This tough, rugged, sleek, quality, military, and high end SUV was the epitome of the male ego, in the form of an SUV. Arnold Schwarzenegger was the first. In 1991, soon after the Gulf war, the actor began calling the manufacturer, urging AM General to sell him one. But executives kept telling him they weren't ready. Schwarzenegger was not easily put off. “One day, recounts James Armour, the president of the company, his secretary announced "that 'Arnold is on the phone.' I didn't believe it, and thought it was a joke. It was him. He says, 'This is Arnold. I want to see you.' I told him we wouldn't sell him one until we were selling them to everybody." His response, says Armour: "What do I have to do to get you to sell them to the public?"”. What better spokesperson to have than Arnold! Creating a buzz, limited resources, and a very different vehicle along with a sleek and tough attitude. A bodybuilding champion, charismatic, sleek and tough himself, driving what the attitude and Hummer brand wanted to represent. Everyone wants something different, which is an oxymoron, and the Hummer line provides that. Its look, attitude, and appeal are drastically different from a normal SUV. Todd Eberhard, a New York portfolio manager, first bought his Hummer a year ago; his biggest concern was getting through the tollbooths on the New Jersey Turnpike. "It's so wide, it was scary at first. But it fits. No problem." Now he laughs at weather that stops most Easterners cold. In a snowstorm last winter, he zoomed past snowplows, whose drivers just grinned. On his way back from upstate New York in a rainstorm this summer, he was puzzled by the bad traffic until he realized the cars in front of him were blocked by two-foot-deep puddles. "A Ford Explorer in front of me thought he could go, but he stalled his motor. I went right around him. There were three separate puddles, and I loved it. I rolled up the windows and went through like nothing." Truly, “like nothing else”! The market was generally made up of men, but there has been an increase in purchase since the H2 and H3 product lines were implemented by women. 20% of H2’s bought were women, and 30% of H3 purchases were made up of women! As Hummer is growing its product line and sales, so are the 154 dealers out of the total of 171 Hummer dealers who have completed new stores by year end. Today there are 130 Hummer dealers with new stores finished or under construction. With Hummer targeting a larger market, on product and price, they can compete with the mainstream SUV’s such as Ford Explorers, yet utilized the rugged and tough Hummer image to harness a larger following. Hummer advertises on major television networks, print ads will appear in 15 magazines, including Fortune, Forbes FYI, Skiing, Field & Stream, Wine Spectator and Cigar Aficionado. Hummer has also been creative by integrating their promotional exposure through their celebrity clients, video games (appearing in games as options), toys (remote control cars/models), military use, and capabilities.
To stay competitive, GM has formed alliances. GM's alliances with Fiat Auto., Isuzu Motors Ltd., Suzuki Motor Corp. and Subarum, the parent of Fuji Heavy Industries Ltd., its own Saab Automobile and Adam Opel units, are increasingly important in product planning. For example, “the Chevrolet Borrego concept uses the Subaru Legacy platform and awd power train, and the Olds 04 concept was built on the Opel Astra platform.” But the alliances often leave GM with too many options. The Opel created Delta small car platform was in doubt for North America, as GM reportedly weighed switching some vehicles to the platform slated for Fiat's Stilo, a small car debuting in Europe this year. Now the Delta platform also will be used for a Chevrolet vehicle. This power train, with these parts, with that body…so many choices are great, but sometimes can cause delay in long term decision making.
As far as marketing, having the military utilize the Hummer brand, which has come under scrutiny due to some malfunctions and needing extra armor, still remains successful, was huge for the Hummer line, as it was for Jeep when they held the contract originally. Engaging more people to purchase with the lower priced yet with great quality H2 and H3, having celebrities such as Arnold drive one, appear in MTV videos, and having the upper class such as professional athletes drive Hummers adds to the appeal. The H2 also will be featured in at least the first season of CBS' “CSI: Miami,” and the division has committed $13 million in cash and vehicles over the next six years to sponsor the Inner-City Games Foundation in Santa Monica, Calif., of which actor Arnold Schwarzenegger is chairman. The foundation works in 15 U.S. inner-city areas, supporting after-school programs in arts, science, computers and sports. Under a deal with McDonald's Corp., GM is giving away 42 million toy SUVs in Happy Meals or Mighty Kids Meals, GM is not the only automaker trying to connect with consumers in nontraditional spaces:
BMW offers a $300 bicycle designed for users as young as 21/2 years old.
A Ford Motor Co. deal in China to market Land Rover vehicles includes outdoor footwear.
The DodgePCRide is a personal computer with a hard drive shaped like a Charger sedan,Viper roadster or Magnum sport wagon, and dodge hemi power tools.
Dealers and manufacturers feel that people can bond more emotionally with consumers through these licensed goods. Hummer teamed up with Nike to design the tires, due to them both focusing on tread wear / traction (Nike on the long distance shoes). The new level of traction came in the form of a set of 34-inch BF Goodrich ACG TA tires, engineered jointly by Nike, GM and B.F. Goodrich, and designed to address multiple traction situations. Also, the seats and armrests are covered with Nike's proprietary Sphere material, which were derived from research on recycled bottles and provide for regulating body temperature regulation and comfort. Even if Sphere proves incapable of managing comfort, it lends "a technical look that reinforces the design of the vehicle."
Hummer focuses primarily on distribution to the military and its dealers in North America, but also works with expanding globally. For example, Grupo Berge will import Hummers to Spain and Portugal starting in January. Grupo Berge, Spain's biggest importer is forming a joint venture with Ben Heiderich, the chairman of Kia Spain. Also, General Motors has signed an agreement with Russian automaker, Avtotar, to begin assembly of the Hummer H2 for the local market. GM reportedly hopes the vehicle will become popular with the growing segment of wealthy Russian businessmen who purchase luxury imports. The vehicle is expected to sell for $85,000 to $110,000. It will be available in yellow, orange and black and is expected to go on sale later this fall. The H2 will not be exported into other parts of Eastern Europe. Currently the large SUV is sold in some parts of Western Europe through GM importers. GM currently builds the Chevy Niva in Togliatti in a joint venture with Russia's largest automaker, AvtoVAZ. Opel Astra production is expected to begin at the JV in the near future. Hummer’s sales are up 200% vs. 2005 since selling the 4X4’s in Europe, opened the first Hummer center in Paris, and soon following in London and Rome, supported by the network of smaller dealerships. In North America during 2002, there were 46 U.S. dealers. GM added dealerships gradually during the next few years. Early additions were markets where Hummer has no distribution, such as Philadelphia and Kansas City, and GM estimated they needed at least 100 dealers to sell the H2 and H1. GM chose new Hummer dealers based on their performance, location and, in larger markets, capital available to add “stand alone” Hummer showrooms. GM sent a letter to dealers, saying GM promised to keep "existing Hummer dealers that are performing satisfactorily under their agreements with AM General." GM added that it would help those Hummer dealers who are underperforming with strategy and education. If they do not improve, GM will not renew their franchises in 2002.
Some aren’t as positive about the Hummer. With rising concern with the environment, issues in Iraq, gas prices, and its size, some feel it’s not sensible. Bob Garfield in “Advertising Age” wrote, “What GM has to do is tap into a rich vein of male insecurity without labeling it as such”, and continues stating it’s to fulfill ego, and the “look at me syndrome”. Hummer isn’t concerned as much anymore if the military contract isn’t renewed, though they don’t want to lose it. They feel that Hummer has established itself publicly now, and is accepted by the normal consumer as a reputable brand for civilians. GM made adjustments due to the environmental concerns with R&D and production of the hybrid, electric car, diesel engines, and hydrogen power. These concepts and cars cost more, and due to lack of sales and waiting lists they couldn’t meet the demand on, the SUV’s still remain popular. The H1 was put out of production, and with the demise of the H1, the biggest Hummer is the H2. The H2 will be restyled and re-engineered for the 2010 model year. The smaller, lighter-weight vehicle is expected to start production in July 2009. The H3 smallest SUV, built on GM's compact-pickup architecture, is likely to get a 5.3-liter V-8 version for the 2007 model year. A crew-cab version is likely for the 2009 model year. An H4 concept GM is considering a Jeep Wrangler-sized/truck vehicle for the 2009 model year, but is in the works.
Competitors are keeping their eye on Hummer due to their emerging presence. Jeep developed a four door larger SUV like vehicle in response the Hummers H3 and development of the H4. GM turned a $435 million profit in the first quarter after losing $10.6 billion last year, and laying off over 35,000 workers. With innovations such as the H3 and eventually H4, fostering alliances through parts, manufacturing, and global networking, GM is attempting to reconcile current financial troubles such as company that has $90 billion in pension liabilities and massive retiree health care costs. Billionaire Kirk Kerkorian's Tracinda, who owns 9.9% of GM stock, urged GM Richard Wagoner Jr. and the board to form an alliance with Renault-Nissan (the 4th largest auto maker). It could be as simple as the GM-Fiat alliance that ended last year, in which GM owned 20% of Fiat and, at one point; Fiat owned 5% of GM stock. The two companies formed a pair of joint ventures to purchase parts and share engines. Wall Street is speculating that Renault-Nissan will take 20% stake in GM if something happened. Strategic alliances such as this are not uncommon. Kirk also aided in facilitating GM’s reorganization and selling of GMAC (General Motors Acceptance Corp., similar to Ford Credit) to raise money for re structuring, and recovering from their huge revenue losses the past few years. The Lincoln Navigator ranges in 50K – 68K, and is a main competitor of the H2. It’s primary competitors when it launched in 1998 was Cadillac’s Escalade, and Land Rover/Range Rover. An internal competitor GM owns is the GMC Yukon/Denali lines, and while these are primary and direct competitors to the Escalade and Navigator, the Hummer line is still differentiated enough design wise to maintain their position, but GM needs to make sure they don’t cannibalize the products. The H3 is in close competition with less luxurious SUV’s such as Jeep and the best selling mid size SUV in America, the Ford Explorer. Each manufacturer is working on constant improvements to make the SUV’s and other cars lighter, more fuel efficient, and environment friendly. The other trend the past decade is to form alliance, joint ventures, enter growing and cost efficient markets over seas for manufacturing, labor, and parts advantage. Ford has been working extensively on a hybrid car, the latest trend in automobiles due to more environmentally conscience and educated consumers, focusing on the Ford Escape and Ford Mariner. Ironically, it’s costly to manufacturer right now, but due to rising gas/oil costs, world events such as Operation Iraqi Freedom, and the depletion of our ozone/global warming, consumers are demanding “healthier” and efficient cars. Hummer does not have a hybrid car in mind, and at the moment the cost would be astronomical due to the size/off road capabilities of the vehicle.
I feel right now the Hummer market is positive. They have targeted a larger demographic, including more women, and reduced the price of the less luxurious H3. Hummer is working on a H4, but if they continue to downgrade and reduce the price of the Hummer line, they will only be able to play on their original image and perception for so long. They’re getting too close to being like any ordinary SUV that their competitors can produce. The H1 was revolutionary, yet priced very high. The Hummer line gradually reduced in price and size, but captured the market that couldn’t afford the H1 price bracket. Hummer must maintain their position as a unique product, not just design. Jeep, Ford Explorers, and Toyota 4 Runners are in close competition with Hummer now, whereas the H1 was truly “Like Nothing Else”. If Hummer continues to adapt to the larger demographic that wants a Hummer, yet can’t afford Hummer pricing, they will position themselves right next to main stream SUV’s, and be “like everything else” if they don’t maintain their image with innovation. Vehicles are essentially an engine encased by a body, running on 4 wheels. For Hummer to not just be another vehicle, I believe they can continue to be innovative with the lower cost lines, but bring back the quality and luxurious H1. Perhaps provide a new version of the H1 (H1 Alpha stopped manufacturing in June 2006) that is more environment friendly, but caters to the upper end buyer. Hummer should continue to form alliances, like the Mondavi wine company has done, and how most wine companies diversify to survive, and to produce globally with cost and market knowledge. The wine companies produce a table wine, premium, and super premium wine, as well as invest in vineyards, land, and bottling. Relating that to Hummer, they need to continue to develop their H3 line, work on the H4, but not forget to maintain their position as a top of the line luxury vehicle with off road capabilities. Continue work on a Hummer truck, and I thought about a car, but that would distract from their “SUV” and “truck like” image. I suggest forming a joint venture internally with a sister company within GM, and work on a car, but not a “Hummer” car. To differentiate the next level Hummer line, they should also choose a different name. What will they come out with if they continue producing vehicles the next 20 years, the H23? They should continue to link the product line to the Hummer name to maintain the quality and tough image, but they will have to market the name differently, perhaps something like “Hummer Sport” to fit the lower end luxury type. If the name it something like the “Hummer Ranch Hand” , that doesn’t sound “military like”, or appeal to the suburban soccer mom. Hummer and GM are doing a great job at partnering up globally, and should continue to do so to integrate into new and growing markets for distribution, parts, and selling cost/competitive advantage, such as they’re doing in Russia. Hummer does a great job, and should continue to be, at creative marketing of their unique vehicle body design and capabilities, and having the Hummer image displayed in video games, commercials, toys, with celebrities, and involved with off road competitions. Dealers are followed up with frequently from GM / Hummer corporate connections in regards to changes in strategy and deals. Dealers often provide financing, rebates, and choices to be able to afford Hummer’s. For example, currently you can purchase a H3 for close to 2K down, 300/month, 39 months, 100K GM power train warranty (5yrs), or an H2 with same terms at a cost of @5K down, and $529/month, and if qualify 0%APR 72 months. The financing side of the business is huge, and can impact revenue tremendously. GM/Hummer still uses GMAC for financing, and to be successful, should maintain a good relationship and marketing of its GM credit card, and finance division. Also, in order for Hummer to have continued success globally, GM and current CEO Rich Wagoner along with the Board needs to continue its reorganizing improvements with innovation and alliances versus lay offs and increased negative press, as well as positive relationships with their manufacturer (in this case AM General). Hummer needs to continue to be innovating and invest in things such as the automatic / online system they developed at their plant in Indiana, and form partnerships with cost efficient manufacturing, labor and parts markets. Hummer isn’t like a normal SUV due to it’s off road capabilities and unique design. They should continue to take advantage and secure future success with this trend that has worked for them. It’s like a Jeep that can go off road, it’s considered luxurious, can cart large items in it like a truck, but you can drive your kids to a soccer game in it. Hummer has established itself more than a military contract vehicle, and can stand on it’s own within GM, and provide for the civilian market. It truly is, at the moment, “like nothing else”.
References:
Title: Modernista! Launches $20 Mil. Hummer Campaign., By: Irwin, Tanya, van der Pool, Lisa, Adweek Southeast Edition, 87566389, 7/8/2002, Vol. 23, Issue 28Database: Business Source Complete
http://www.amgeneral.com/ (history/profile)
http://www.generalmotors.com/ and http://www.hummer.com/
www.fortune500.com
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AM General ads point to Hummer Web site., By: Halliday, Jean, Automotive News, 00051551, 11/15/99, Vol. 74, Issue 5848
Title: Jeep, Hummer, Suzuki?, By: Priddle, Alisa, Ward's Auto World, 00430315, Nov2005, Vol. 41, Issue 11
HUMMER BUGGY IN GM'S FUTURE., By: Rendell, Julian, AutoWeek, 01929674, 10/31/2005, Vol. 55, Issue 44
http://www.businessweek.com/autos/content/jun2006/bw20060630_498950.htm
http://wikicars.org/en/Hummer_H3
“Like nothing else”
Look, it’s a truck, a car, a luxury vehicle, all terrain, sporty SUV?! As the General Motors (GM) slogan goes for their Hummer product line, it’s truly “Like Nothing Else”! There are Sport Utility Vehicles (SUV) that come close, but not similar in comparison. Main competitors include the Lincoln Navigator (Ford), Range Rover, Lexis LX 470, and smaller SUV’s such as the Ford Explorer, Jeep, Toyota, Land Rover, and Nissan. GM’s Hummer started as a concept vehicle for the military, and eventually became marketed and distributed to the mainstream.
The Hummer is manufactured by AM General. The origins of AM General can be traced back to 1903, in Terre Haute, Indiana, where it started manufacturing bicycles, and expanded to the Overland Automotive Division to manufacture motor vehicles. In 1908, John North Willys purchased the motor division. Under Mr.Willys direction, the company started manufacturing the “Whippet” car, and became Willys-Overland Motors Inc in 1936. In the 1940’s, they manufactured America’s first 4 wheel drive vehicle, the famous “Jeep”. As the Hummer has been taken mainstream, the Jeep line started the trend from military to civilian vehicle during this time. The company was purchased by the Henry J. Kaiser interests in 1953, and in 1960 Wills Motors, Inc began the first civilian government program by producing and developing a ½ ton delivery van for the United States Post Office, and eventually produced 14,000 of them. In 1963, the company was renamed Kaiser Jeep Corporation, and in 1964 purchased the Studebaker Corporation manufacturing facilities in South Bend, Indiana where they produced 112,000 5-ton and 150,000 21/2-ton trucks for the United States military. In 1967, Kaiser Jeep formed a division dedicated to the R&D for government vehicles, and awarded a contract by the US Post Office for the ¼ ton DJ-5 Dispatcher (similar to the original Jeep), and produced over 150,000 of them. In 1970, American Motors Corporation purchased Kaiser Jeep Corporation from Kaiser Industries. In 1971, AM General was incorporated as a separate subsidiary of the American Motors Corporation, separate from Jeep Corporation. This was in order to have AM General fully dedicate itself to the needs of the government and contract fulfillment. AM General developed and patented the Central Tire Inflation System (CTI) for the M809 and M939 5 ton trucks, and also developed driver activated dashboard controls to control tire pressure for different terrain conditions while the vehicle was still in motion. This improved towing capability, and contributed to longer vehicle life and lower life cycle costs.
During the 1970’s, there was need and development of a military vehicle that was an all purpose vehicle. Specifically, the Army wanted a “high mobility multi-purpose wheeled vehicle”, or a HMMWV, M998 Series. AM General competed to develop such a vehicle for the military, and began design work in 1979 for such a vehicle. A vehicle titles the HUMVEE was the concept created. This was a 1.25 ton tuck that AM General worked on to replace the M151, which was the previous model utilized by the US military for “lighter work”. The US Army awarded AM General a contract to develop a prototype contract in 1981. In 1982, development and operational testing was conducted over a five month time span. There was much testing, on and off road. After much debate, testing, and development to meet specific standards, the United States Army awarded AM General a $1.2 billion dollar contract for 55,000 HUMVEES to be produced for the US Army. The military saw a need for more of the “Hummer” vehicle, and upped the order by 15,000 additional units. Humvees were and are used by the U.S. Army, Marine Corps, Air Force and Navy at locations throughout the United States and overseas. In 1983, the LTV Corporation bought AM General from American Motors Corporation and established it as a wholly owned subsidiary of the LTV Aerospace and Defense Company. In August 1989, the U.S. Army awarded AM General a new multiyear contract for continued production of more then 33,000 Humvees. First deliveries under this new contract began in January 1990. Total value of this second multiyear contract was approximately $1 billion. Options raised the number of vehicles produced to nearly 50,000. In 1994 the Army awarded AM General an additional contract. The latest U.S. Army contract awarded in 2000, calls for the production of up to 31,474 additional Humvees through 2007! Over 175,000 vehicles have been built and delivered to the U.S. Armed Forces and more than 50 friendly overseas nations. The tough and rugged Humvee was prominent in the U.S. military, and saw action in Panama in 1989-90, and during Operation Desert Storm in 1991, where nearly 20,000 won praise and were utilized by US troops. More recently, Humvees have played been utilized in campaigns in Somalia, the Balkans, Afghanistan and Iraq. Wherever American soldiers go, their Humvees follow. In April 1992, The Renco Group, Inc. of New York City purchased AM General Corporation from LTV.In 1992, the HUMVEE went mainstream and was produced for the general public. It was renamed its popular name as it’s known by today, the “Hummer”. It was branded as the worlds most serious and toughest 4X4, and its long life, durability, performance, and tough image was marketed. In 1999, AM General and General Motors Corporation finalized an agreement to jointly pursue product, marketing, and distribution of the Hummer. GM acquired ownership of the Hummer brand name in 1999, and the H1 was born. In 2002, the H2 followed as a more mainstream SUV focused on a larger demographic with a sleeker, smaller, yet still tough design, and also cheaper. Soon following was the H3; designers are currently working in more environmentally friendly parts, and a truck line. In April 2002, AM General was converted into a limited liability company. AM General also provides parts and training support for all its products and its Engineering and Product Development Center provides systems technical support for several military vehicle systems in addition to the Humvee. AM General, which remains an independent company and government and military contractor. GM was formed in 1908, and is the world’s largest automaker with brands such as Buick, Cadillac, Chevrolet, Pontiac, Saab, Saturn, and Hummer.
Hummer’s starting strategy was to gain the contract with the US government to manufacture and produce the tough and rugged all terrain vehicle for military, and continues so today. They wanted to develop something that the military could use for general all purpose transportation, and the Humvee was born, and manufactured by AM General. In 1992, their strategy shifted to the civilian demographic, and the H1 was produced for the public. The cost for the H1 was around $100,000! This limited the demographic the vehicle could be sold to, and Hummer targeted men over 40, with an annual household income of 175,000 dollars. This was a huge advancement and shift in market from where the Hummer originated. Originally intended only for the military, and focused on getting production and development for a government contract. The H1 was marketed as something “like nothing else”. Nothing was like it, so the marketing firm who won the 20M contract, Modernista, Boston, was right on the money. The problem wasn’t that the marketing wasn’t on the “money”, but perhaps “money” itself! The high end SUV was just that, with the cost of over $100,000, and having the money to put additional features on the H1 gets very costly, with and average cost of $10K on top of the already high end price. Other issues such as lack of fuel efficiency, size, and lack of being environmentally friendly added issues. The typical buyer makes $200,000 to $300,000 a year, says AM General. Jerry Smith.
Hummer adopted the slogan that Nike’s CEO lived by, which was “Innovate or die”. Noticing the large potential for the sales of Hummers, yet the average consumer making around $40K couldn’t afford, Hummer decided to design something that would fit the market they were missing. Hummer had already established itself as a reputable, high end, quality, and tough brand. The concept that was developed was the H2, which would cost around $50K, half that of the H1! The $50,000 H2, which went on sale in June, is the first new vehicle from Hummer since GM acquired the brand name in 1999. While the H2 did not compete directly with Jeep vehicles, a future H3 model is expected to be priced at around $30,000, posing a direct challenge to Jeep. GM expects to sell 35,000 to 40,000 H2s annually, compared with H1 annual sales of around 1,000. Chrysler / Jeep found that the grille on the H2 was very similar to their trademark design, but the courts found that H2 does not infringe on the Jeep trademark Also, the court felt that Jeep couldn't prove consumer confusion between the grille designs of the H2 and Jeep vehicles. The H2 and Hummer brand had sad, but creative marketing. Due to the military campaigns in Iraq (Gulf war in 1991) the Humvee’s were constantly on television, gaining technically free advertising from being on news programs when military personnel were interviewed, or a station such as CNN was on site covering a story. Being associated with the tough US military image, and them using the vehicle, the public viewed the Hummer brand in this manner as well. Hummer decided to implement the H2 to meet such demands due to the H1 being such a high cost. More consumers could now afford the all terrain SUV that was once out of most Americans affordability. The high cost set Hummer apart as well. Like a fine bottle of wine that costs thousands of dollars, the H1 was the “expensive wine of SUV’s”. Consumers wanted a taste of the quality, image, and popularity the Hummer would provide, and with the development of the H2, a larger demographic could now be reached! When building the H2, forty percent of the parts were taken from GM's truck line. GM parts account for about 75 percent of the value of the truck, one engineer estimated. The front suspension is borrowed from GM's three-quarter-ton full-sized trucks. The five-link rear suspension design is shared with the Chevrolet Tahoe. The engine consists of GM's 316-hp 6.0-liter V-8, which produces 360 pounds-feet of torque. The automatic transmission also is GM's. Below are some other GM parts (lowering cost margin):
Floor pan, from the Tahoe, which was patched in the middle to create the H2's 6.8-inch longer wheelbase.
Instrument panel structure, from the full-sized trucks.
Steering column, from the mid-sized Chevrolet TrailBlazer.
Frame, which was created by splicing together portions of GM frames.
This enabled the H2 to have a sticker price of $48,800, which is far from inexpensive, but well below the H1's base sticker of $109,834. As for off-road ability, the H2 can cross a 20-inch deep stream, climb a 60-degree grade and crawl over rocks as tall as 16 inches. This isn’t exact as the H1 capabilities, yet more “street friendly” and still capable of going off road. One analyst sees risks in producing a tamer Hummer. The H1 became an icon because of its ruggedness. “Part of the appeal aspect of the H1 is its sheer, mammoth size,” said Todd Turner, president of Car Concepts, a consulting firm in Thousand Oaks, Calif. “But will that translate into a far more refined type of vehicle that is more mainstream?” You lose a lot of what that appeal is about by scaling it down and making it more compatible with highways and parking lots.”GM was keen to retain the military soul of the H1 because research showed that buyers responded to the Hummer's Army roots. In 1998, DiGiovanni was doing market research on a military-looking concept truck that GM had developed before it acquired the right to market Hummers. At the time, he was head of GM's research and forecasting group in North America.GM tried various names on the concept, called the Chunk. When DiGiovanni branded/labeled it as a Hummer, buyers' response skyrocketed. They had already established great brand awareness from the originally Humvee and the H1, so it seemed fitting to maintain and focus on the quality and image of Hummer. In January 1999, DiGiovanni and his group presented the H2 idea to GM's North American Strategy Board. The board authorized contact with AM General, in Mishawaka, IN. An agreement was signed in 1999, GM purchased the rights to the Hummer name and AM General agreed to assemble the H2. The assembly contract runs through 2009. Edag Engineering and Design AG of Fulda, Germany, helped GM develop the H2 in a speedy 16 months. GM was trying to fill product gaps, shake its reputation for blandness, and feels it will do so with the H2 line, and future product lines under Hummer.
The H2 became a hit and success. Due to the innovation and success of the H2, Hummer developed a smaller truck than the H2, the H3. The H3 rolled out during the 2005 model year, was priced $30,000 to $40,000, and increased sales 43%. Underneath, H3T is powered by a 350-hp, 350-lb-ft turbocharged variable-valve version of the Colorado/Canyon 3.5-liter inline five, mated to a four-speed automatic. This provides the quality toughness/image Hummer is known for, but is not as high in price as the H1 and H2 due to smaller size. The H3 gets around 20mpg versus the 10-15mpg the H1/H2’s get. A four-wheel-drive system sends power to specialized 19-inch multitraction tires developed by GM, Nike and BFGoodrich. As far as “look”, as Hummer has grown its market and demographic, consumer taste and preference for maintaining differentiation exists. Hummer wanted to position itself in a broader market, yet with the same image. Hummer responded not only with the different product lines and features, but also with new colors such as red, yellow, and orange. These types of options and the H3 opened up the demographic that Hummer could reach. The Hummer was viewed more of an attitude and almost a way of life. A driver of the H1 vehicle that is 6 feet 3 inches high, 15 feet 4 inches long, and nearly a foot wider than the largest Cadillac stated,” I almost felt like a celebrity, going to work I would be stopped and asked about my Hummer constantly!”, a Hummer owner/driver Adare Fritz, who runs the Mishawaka, IN Hummer plant stated. “Giant front tires, twice the diameter of a passenger car's door, swell out past stumpy front bumpers. The chassis is made of massive, hollow girders. The body is made of corrosion-proof aircraft aluminum. Rivets, hundreds of them, bulge all over the surface. Thousands more dot the inside. Thick steel rings protrude through the hood and back bumper so you could, in a pinch, drop in somewhere by helicopter or even by parachute.” This tough, rugged, sleek, quality, military, and high end SUV was the epitome of the male ego, in the form of an SUV. Arnold Schwarzenegger was the first. In 1991, soon after the Gulf war, the actor began calling the manufacturer, urging AM General to sell him one. But executives kept telling him they weren't ready. Schwarzenegger was not easily put off. “One day, recounts James Armour, the president of the company, his secretary announced "that 'Arnold is on the phone.' I didn't believe it, and thought it was a joke. It was him. He says, 'This is Arnold. I want to see you.' I told him we wouldn't sell him one until we were selling them to everybody." His response, says Armour: "What do I have to do to get you to sell them to the public?"”. What better spokesperson to have than Arnold! Creating a buzz, limited resources, and a very different vehicle along with a sleek and tough attitude. A bodybuilding champion, charismatic, sleek and tough himself, driving what the attitude and Hummer brand wanted to represent. Everyone wants something different, which is an oxymoron, and the Hummer line provides that. Its look, attitude, and appeal are drastically different from a normal SUV. Todd Eberhard, a New York portfolio manager, first bought his Hummer a year ago; his biggest concern was getting through the tollbooths on the New Jersey Turnpike. "It's so wide, it was scary at first. But it fits. No problem." Now he laughs at weather that stops most Easterners cold. In a snowstorm last winter, he zoomed past snowplows, whose drivers just grinned. On his way back from upstate New York in a rainstorm this summer, he was puzzled by the bad traffic until he realized the cars in front of him were blocked by two-foot-deep puddles. "A Ford Explorer in front of me thought he could go, but he stalled his motor. I went right around him. There were three separate puddles, and I loved it. I rolled up the windows and went through like nothing." Truly, “like nothing else”! The market was generally made up of men, but there has been an increase in purchase since the H2 and H3 product lines were implemented by women. 20% of H2’s bought were women, and 30% of H3 purchases were made up of women! As Hummer is growing its product line and sales, so are the 154 dealers out of the total of 171 Hummer dealers who have completed new stores by year end. Today there are 130 Hummer dealers with new stores finished or under construction. With Hummer targeting a larger market, on product and price, they can compete with the mainstream SUV’s such as Ford Explorers, yet utilized the rugged and tough Hummer image to harness a larger following. Hummer advertises on major television networks, print ads will appear in 15 magazines, including Fortune, Forbes FYI, Skiing, Field & Stream, Wine Spectator and Cigar Aficionado. Hummer has also been creative by integrating their promotional exposure through their celebrity clients, video games (appearing in games as options), toys (remote control cars/models), military use, and capabilities.
To stay competitive, GM has formed alliances. GM's alliances with Fiat Auto., Isuzu Motors Ltd., Suzuki Motor Corp. and Subarum, the parent of Fuji Heavy Industries Ltd., its own Saab Automobile and Adam Opel units, are increasingly important in product planning. For example, “the Chevrolet Borrego concept uses the Subaru Legacy platform and awd power train, and the Olds 04 concept was built on the Opel Astra platform.” But the alliances often leave GM with too many options. The Opel created Delta small car platform was in doubt for North America, as GM reportedly weighed switching some vehicles to the platform slated for Fiat's Stilo, a small car debuting in Europe this year. Now the Delta platform also will be used for a Chevrolet vehicle. This power train, with these parts, with that body…so many choices are great, but sometimes can cause delay in long term decision making.
As far as marketing, having the military utilize the Hummer brand, which has come under scrutiny due to some malfunctions and needing extra armor, still remains successful, was huge for the Hummer line, as it was for Jeep when they held the contract originally. Engaging more people to purchase with the lower priced yet with great quality H2 and H3, having celebrities such as Arnold drive one, appear in MTV videos, and having the upper class such as professional athletes drive Hummers adds to the appeal. The H2 also will be featured in at least the first season of CBS' “CSI: Miami,” and the division has committed $13 million in cash and vehicles over the next six years to sponsor the Inner-City Games Foundation in Santa Monica, Calif., of which actor Arnold Schwarzenegger is chairman. The foundation works in 15 U.S. inner-city areas, supporting after-school programs in arts, science, computers and sports. Under a deal with McDonald's Corp., GM is giving away 42 million toy SUVs in Happy Meals or Mighty Kids Meals, GM is not the only automaker trying to connect with consumers in nontraditional spaces:
BMW offers a $300 bicycle designed for users as young as 21/2 years old.
A Ford Motor Co. deal in China to market Land Rover vehicles includes outdoor footwear.
The DodgePCRide is a personal computer with a hard drive shaped like a Charger sedan,Viper roadster or Magnum sport wagon, and dodge hemi power tools.
Dealers and manufacturers feel that people can bond more emotionally with consumers through these licensed goods. Hummer teamed up with Nike to design the tires, due to them both focusing on tread wear / traction (Nike on the long distance shoes). The new level of traction came in the form of a set of 34-inch BF Goodrich ACG TA tires, engineered jointly by Nike, GM and B.F. Goodrich, and designed to address multiple traction situations. Also, the seats and armrests are covered with Nike's proprietary Sphere material, which were derived from research on recycled bottles and provide for regulating body temperature regulation and comfort. Even if Sphere proves incapable of managing comfort, it lends "a technical look that reinforces the design of the vehicle."
Hummer focuses primarily on distribution to the military and its dealers in North America, but also works with expanding globally. For example, Grupo Berge will import Hummers to Spain and Portugal starting in January. Grupo Berge, Spain's biggest importer is forming a joint venture with Ben Heiderich, the chairman of Kia Spain. Also, General Motors has signed an agreement with Russian automaker, Avtotar, to begin assembly of the Hummer H2 for the local market. GM reportedly hopes the vehicle will become popular with the growing segment of wealthy Russian businessmen who purchase luxury imports. The vehicle is expected to sell for $85,000 to $110,000. It will be available in yellow, orange and black and is expected to go on sale later this fall. The H2 will not be exported into other parts of Eastern Europe. Currently the large SUV is sold in some parts of Western Europe through GM importers. GM currently builds the Chevy Niva in Togliatti in a joint venture with Russia's largest automaker, AvtoVAZ. Opel Astra production is expected to begin at the JV in the near future. Hummer’s sales are up 200% vs. 2005 since selling the 4X4’s in Europe, opened the first Hummer center in Paris, and soon following in London and Rome, supported by the network of smaller dealerships. In North America during 2002, there were 46 U.S. dealers. GM added dealerships gradually during the next few years. Early additions were markets where Hummer has no distribution, such as Philadelphia and Kansas City, and GM estimated they needed at least 100 dealers to sell the H2 and H1. GM chose new Hummer dealers based on their performance, location and, in larger markets, capital available to add “stand alone” Hummer showrooms. GM sent a letter to dealers, saying GM promised to keep "existing Hummer dealers that are performing satisfactorily under their agreements with AM General." GM added that it would help those Hummer dealers who are underperforming with strategy and education. If they do not improve, GM will not renew their franchises in 2002.
Some aren’t as positive about the Hummer. With rising concern with the environment, issues in Iraq, gas prices, and its size, some feel it’s not sensible. Bob Garfield in “Advertising Age” wrote, “What GM has to do is tap into a rich vein of male insecurity without labeling it as such”, and continues stating it’s to fulfill ego, and the “look at me syndrome”. Hummer isn’t concerned as much anymore if the military contract isn’t renewed, though they don’t want to lose it. They feel that Hummer has established itself publicly now, and is accepted by the normal consumer as a reputable brand for civilians. GM made adjustments due to the environmental concerns with R&D and production of the hybrid, electric car, diesel engines, and hydrogen power. These concepts and cars cost more, and due to lack of sales and waiting lists they couldn’t meet the demand on, the SUV’s still remain popular. The H1 was put out of production, and with the demise of the H1, the biggest Hummer is the H2. The H2 will be restyled and re-engineered for the 2010 model year. The smaller, lighter-weight vehicle is expected to start production in July 2009. The H3 smallest SUV, built on GM's compact-pickup architecture, is likely to get a 5.3-liter V-8 version for the 2007 model year. A crew-cab version is likely for the 2009 model year. An H4 concept GM is considering a Jeep Wrangler-sized/truck vehicle for the 2009 model year, but is in the works.
Competitors are keeping their eye on Hummer due to their emerging presence. Jeep developed a four door larger SUV like vehicle in response the Hummers H3 and development of the H4. GM turned a $435 million profit in the first quarter after losing $10.6 billion last year, and laying off over 35,000 workers. With innovations such as the H3 and eventually H4, fostering alliances through parts, manufacturing, and global networking, GM is attempting to reconcile current financial troubles such as company that has $90 billion in pension liabilities and massive retiree health care costs. Billionaire Kirk Kerkorian's Tracinda, who owns 9.9% of GM stock, urged GM Richard Wagoner Jr. and the board to form an alliance with Renault-Nissan (the 4th largest auto maker). It could be as simple as the GM-Fiat alliance that ended last year, in which GM owned 20% of Fiat and, at one point; Fiat owned 5% of GM stock. The two companies formed a pair of joint ventures to purchase parts and share engines. Wall Street is speculating that Renault-Nissan will take 20% stake in GM if something happened. Strategic alliances such as this are not uncommon. Kirk also aided in facilitating GM’s reorganization and selling of GMAC (General Motors Acceptance Corp., similar to Ford Credit) to raise money for re structuring, and recovering from their huge revenue losses the past few years. The Lincoln Navigator ranges in 50K – 68K, and is a main competitor of the H2. It’s primary competitors when it launched in 1998 was Cadillac’s Escalade, and Land Rover/Range Rover. An internal competitor GM owns is the GMC Yukon/Denali lines, and while these are primary and direct competitors to the Escalade and Navigator, the Hummer line is still differentiated enough design wise to maintain their position, but GM needs to make sure they don’t cannibalize the products. The H3 is in close competition with less luxurious SUV’s such as Jeep and the best selling mid size SUV in America, the Ford Explorer. Each manufacturer is working on constant improvements to make the SUV’s and other cars lighter, more fuel efficient, and environment friendly. The other trend the past decade is to form alliance, joint ventures, enter growing and cost efficient markets over seas for manufacturing, labor, and parts advantage. Ford has been working extensively on a hybrid car, the latest trend in automobiles due to more environmentally conscience and educated consumers, focusing on the Ford Escape and Ford Mariner. Ironically, it’s costly to manufacturer right now, but due to rising gas/oil costs, world events such as Operation Iraqi Freedom, and the depletion of our ozone/global warming, consumers are demanding “healthier” and efficient cars. Hummer does not have a hybrid car in mind, and at the moment the cost would be astronomical due to the size/off road capabilities of the vehicle.
I feel right now the Hummer market is positive. They have targeted a larger demographic, including more women, and reduced the price of the less luxurious H3. Hummer is working on a H4, but if they continue to downgrade and reduce the price of the Hummer line, they will only be able to play on their original image and perception for so long. They’re getting too close to being like any ordinary SUV that their competitors can produce. The H1 was revolutionary, yet priced very high. The Hummer line gradually reduced in price and size, but captured the market that couldn’t afford the H1 price bracket. Hummer must maintain their position as a unique product, not just design. Jeep, Ford Explorers, and Toyota 4 Runners are in close competition with Hummer now, whereas the H1 was truly “Like Nothing Else”. If Hummer continues to adapt to the larger demographic that wants a Hummer, yet can’t afford Hummer pricing, they will position themselves right next to main stream SUV’s, and be “like everything else” if they don’t maintain their image with innovation. Vehicles are essentially an engine encased by a body, running on 4 wheels. For Hummer to not just be another vehicle, I believe they can continue to be innovative with the lower cost lines, but bring back the quality and luxurious H1. Perhaps provide a new version of the H1 (H1 Alpha stopped manufacturing in June 2006) that is more environment friendly, but caters to the upper end buyer. Hummer should continue to form alliances, like the Mondavi wine company has done, and how most wine companies diversify to survive, and to produce globally with cost and market knowledge. The wine companies produce a table wine, premium, and super premium wine, as well as invest in vineyards, land, and bottling. Relating that to Hummer, they need to continue to develop their H3 line, work on the H4, but not forget to maintain their position as a top of the line luxury vehicle with off road capabilities. Continue work on a Hummer truck, and I thought about a car, but that would distract from their “SUV” and “truck like” image. I suggest forming a joint venture internally with a sister company within GM, and work on a car, but not a “Hummer” car. To differentiate the next level Hummer line, they should also choose a different name. What will they come out with if they continue producing vehicles the next 20 years, the H23? They should continue to link the product line to the Hummer name to maintain the quality and tough image, but they will have to market the name differently, perhaps something like “Hummer Sport” to fit the lower end luxury type. If the name it something like the “Hummer Ranch Hand” , that doesn’t sound “military like”, or appeal to the suburban soccer mom. Hummer and GM are doing a great job at partnering up globally, and should continue to do so to integrate into new and growing markets for distribution, parts, and selling cost/competitive advantage, such as they’re doing in Russia. Hummer does a great job, and should continue to be, at creative marketing of their unique vehicle body design and capabilities, and having the Hummer image displayed in video games, commercials, toys, with celebrities, and involved with off road competitions. Dealers are followed up with frequently from GM / Hummer corporate connections in regards to changes in strategy and deals. Dealers often provide financing, rebates, and choices to be able to afford Hummer’s. For example, currently you can purchase a H3 for close to 2K down, 300/month, 39 months, 100K GM power train warranty (5yrs), or an H2 with same terms at a cost of @5K down, and $529/month, and if qualify 0%APR 72 months. The financing side of the business is huge, and can impact revenue tremendously. GM/Hummer still uses GMAC for financing, and to be successful, should maintain a good relationship and marketing of its GM credit card, and finance division. Also, in order for Hummer to have continued success globally, GM and current CEO Rich Wagoner along with the Board needs to continue its reorganizing improvements with innovation and alliances versus lay offs and increased negative press, as well as positive relationships with their manufacturer (in this case AM General). Hummer needs to continue to be innovating and invest in things such as the automatic / online system they developed at their plant in Indiana, and form partnerships with cost efficient manufacturing, labor and parts markets. Hummer isn’t like a normal SUV due to it’s off road capabilities and unique design. They should continue to take advantage and secure future success with this trend that has worked for them. It’s like a Jeep that can go off road, it’s considered luxurious, can cart large items in it like a truck, but you can drive your kids to a soccer game in it. Hummer has established itself more than a military contract vehicle, and can stand on it’s own within GM, and provide for the civilian market. It truly is, at the moment, “like nothing else”.
References:
Title: Modernista! Launches $20 Mil. Hummer Campaign., By: Irwin, Tanya, van der Pool, Lisa, Adweek Southeast Edition, 87566389, 7/8/2002, Vol. 23, Issue 28Database: Business Source Complete
http://www.amgeneral.com/ (history/profile)
http://www.generalmotors.com/ and http://www.hummer.com/
www.fortune500.com
Hummer campaign effectively reaches target audience: jerks., By: Garfield, Bob, Advertising Age, 00018899, 7/7/2003, Vol. 74, Issue 27
A BUMMER FOR THE HUMMER., By: Welch, David, Business Week, 00077135, 2/23/2004, Issue 3871
GM wins another round in the Hummer-Jeep grille battle., By: Crain, K.C., Jewett, Dale, Automotive News, 00051551, 11/25/2002, Vol. 77, Issue 6013
GM trims Hummer H2 price by sharing parts., By: Kranz, Rick, Automotive News, 00051551, 6/17/2002, Vol. 76, Issue 5987
THIS IS NOT YOUR FATHER'S HUMMER., By: Keyo, Michelle, Inc., 01628968, Sep2001, Vol. 23, Issue 12
What in the world is that thing? Why, it's a Hummer. What's a Hummer? Aah! Thought you'd never ask., By: O'Reilly, Brian, Llosa, Luis Fernando, Fortune, 00158259, 10/2/95, Vol. 132, Issue 7
Hummer ponders adding 2 models to lineup., By: Kisiel, Ralph, Automotive News, 00051551, 2/20/2006, Vol. 80, Issue 6190
: If Humvee is replaced, will Hummer get hammered?, By: Lapham, Edward, Automotive News, 00051551, 10/16/2006, Vol. 81, Issue 6225
Why GM is putting Hummers in Happy Meals., By: Halliday, Jean, Automotive News, 00051551, 9/18/2006, Vol. 81, Issue 6221
Hummer: H1 is done for; H4 being studied for 2009., Automotive News, 00051551, 8/21/2006, Vol. 80, Issue 6217
Hummer taps Nike for H3T., By: Stoll, John D., Automotive News, 00051551, 1/5/2004, Vol. 78, Issue 60
: Hummer H3T concept: Turbo truck with a capital T., By: Gritzinger, Bob, AutoWeek, 01929674, 12/15/2003, Vol. 53, Issue 50
Hummers will be sold in Iberia., By: de Oliveira, Paulo Soares, Automotive News Europe, 11/3/2003, Vol. 8, Issue 21
Hummer Assembly set for Russia., By: Wielgat, Andrea, Automotive Industries, 10994130, Sep2003, Vol. 183, Issue 9
HUMMER OFF-ROADERS PLOW NEW INROADS., By: Yarrow, Richard, AutoWeek, 01929674, 10/30/2006, Vol. 56, Issue 45
Hummer's task: Become trendy, but stay tough., By: Cantwell, Julie, Automotive News, 00051551, 7/8/2002, Vol. 76, Issue 5992
AM General ads point to Hummer Web site., By: Halliday, Jean, Automotive News, 00051551, 11/15/99, Vol. 74, Issue 5848
Title: Jeep, Hummer, Suzuki?, By: Priddle, Alisa, Ward's Auto World, 00430315, Nov2005, Vol. 41, Issue 11
HUMMER BUGGY IN GM'S FUTURE., By: Rendell, Julian, AutoWeek, 01929674, 10/31/2005, Vol. 55, Issue 44
http://www.businessweek.com/autos/content/jun2006/bw20060630_498950.htm
http://wikicars.org/en/Hummer_H3
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