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Hummer Bummer : Superjeep Star of Desert Storm Isn't Selling Very Well to Civilians

August 21, 1993|From Associated Press

SOUTH BEND, Ind. — Desert Storm gave it free advertising. Arnold Schwarzenegger bought one. But the Hummer, the muscular military four-wheel-drive that seemed destined for domestic success is stuck in a sales sand trap.

AM General, the defense contractor that has made thousands of the nothing-stops-them superjeeps for the Army, is cutting production and laying off more than 10% of its work force this fall, with further cutbacks possible.

The outlook seems gloomy for a pickup in civilian demand for the Hummer, also known as the Humvee, short for High Mobility, Multi-Purpose Wheeled Vehicle.

"There's been nothing in sales to indicate a strong upswing," said Mike Cinal, bargaining chairman for United Auto Workers union Local 5, which represents Hummer assemblers at the plant in Mishawaka, Ind. "And I think everyone seems to be puzzled by that. No one has an answer in the company."

Craig Mac Nab, an AM General spokesman, declined to specify how many Hummers have been sold since October, 1992, when the company first began marketing the vehicles domestically. Nor would he specify how many of the 1,000 Hummer assemblers ultimately would get pink slips.

But he said much of the company's sales effort isn't seen by ordinary consumers because AM General is aiming for business customers, who presumably can afford the Hummer's price tag.

The Hummer costs $39,500 for stripped down models and up to $75,000 with all options, which range from air conditioning to centrally controlled adjustable tire inflation.

"You don't see my ads in 'Oil and Gas Journal,' 'Coal,' 'Firefighters' News,' " Mac Nab said. "That's where the real volume business is for us over the long haul, the commercial-industrial application of the vehicle."

To some extent, AM General's sales problem reflect the overall challenge many defense contractors face in converting to peacetime businesses in an era of Pentagon austerity. Many companies accustomed to doing work exclusively for the military have little experience selling into a competitive marketplace.

"This is not General Motors. This is not Chrysler. This is not Ford, that's been dealing with the public for 75 years," said Cinal, the union official. "This is AM General, who's been doing it since Oct. 1, 1992. There's a lot to learn."

South Bend-based AM General has built about 112,000 Hummers since it won the first Army contract in March, 1983. More than 88,000 have gone to the Army.

Production under the second contract, a $1.3-billion deal, is expected to end in early 1995. The government is expected to offer a third five-year pact next year, but it will be considerably smaller. There do not appear to be enough alternatives to fill the void.

"We don't think we can produce civilian business that would keep us at the same level that we were at when the military contract was at its highest," Mac Nab said.

Despite the gloomy outlook, there have been encouraging signs this summer.

The company has added about five U.S. dealerships to 25 existing ones, and dealerships are nearly ready to open in the Middle East and Canada, Mac Nab said.

AM General also is bidding for a five-year contract to rebuild 3,000 2 1/2-ton Army trucks, Cinal said.

The company's Houston dealership recently sold 15 Hummers to a U.S. company conducting oil exploration in the Middle East, and the company has returned for about five more. The Miami dealership recently sold six Hummers to the Florida Department of Forestry.

Those specially equipped Hummers are being used to fight fires in South Florida, where damage from Hurricane Andrew remains troublesome, said Mike Long, chief of Florida's Forest Protection Bureau.

"I think the Hummer's got a lot of potential," Long said. "But it's a new kid on the block. We move slowly rather than quickly on something like that, because they are an expensive vehicle."

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