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From NY Times: http://www.nytimes.com/2004/05/17/bu...rint&position=

May 17, 2004
Hummer Shows Signs of Losing Its Swagger
By DANNY HAKIM

DETROIT, May 16 ? Like other Hummer dealers, Jim Lynch is spending millions of dollars to erect a giant glass and steel Quonset hut in Chesterfield, Mo., to replace his dealership near St. Louis. General Motors is insisting that its Hummer dealers plant these fortresses in chic suburbs across America, each announced by a 35-foot-tall "H" out front.

But most dealers are undertaking the ambitious construction project just as Hummer, the loudest and proudest of the giant American sport utility vehicles, has shown signs of losing its swagger.

Sales of the flagship Hummer H2 have fallen for eight consecutive months, and 24 percent in the first four months of the year, compared with the same periods a year earlier. G.M. has resorted to rebates and financing deals, which have become standard for every Detroit brand but Hummer. Inventories piled up as Hummers sat unsold 62 days on average in the first quarter, compared with 15 days a year earlier. And G.M. is now using leases, which are less lucrative than sales, to move a quarter of its volume of H2's, according to J. D. Power & Associates.

"I don't know what it is. I know in some parts of the country it became the poster child for large S.U.V.'s for people who didn't like them," said Mr. Lynch, who has sold Hummers for a decade.

"I know they're burning them in California," he added, referring to the arson of a dealership last year. The attack was linked to the Earth Liberation Front, a radical environmental group. "But we didn't see that here," he said.

Dealers and analysts say rising gas prices are contributing factors for the vehicle, which gets about 11 miles per gallon and has a smaller gas tank than some rivals. For the last two years, fuel economy has been among the top 10 complaints of Hummer owners in J. D. Power's initial quality surveys.

But other giant-sized S.U.V.'s showed signs of sales weakness only in April. To most analysts, the Hummer's main problem is that the H2's success was as a flashy new motorized toy whose time came and went.

G.M. is betting the brand will be revived next year by the H3, a smaller Hummer in the $30,000 range.

"We look at the higher-end S.U.V.'s as really being fashion statements," said Wes Brown, an analyst at Iceology, a market research firm in Los Angeles. "It had its moment in the sun when everyone had to have one. And now, that's it. It's done." The H2's initial success and subsequent cooling off was mirrored by other memorable vehicles, including late 90's revivals of the Ford Thunderbird and Volkswagen Beetle, he said.

Michael DiGiovanni, Hummer's general manager, said, "The brand has enormous growth potential. We're just in our infancy."

"If we had one vehicle line, like the H2, that would be hard to sustain the brand, but we've planned it well and we're going to grow next year."

G.M. owns the brand's retail rights, but Hummers are built by AM General, a privately held company based in South Bend, Ind., that also builds military Humvees. When Hummer was introduced more than a decade ago ? Arnold Schwarzenegger bought the first one ? it was little different from a Humvee and it sold for $100,000 and up.

But in 2002, G.M. brought Hummer to a wider audience with the $50,000 suburbanized H2 with creature comforts like heated seats. It was a roaring success. It sold for more than a year with almost no incentives, unheard of in Detroit, which has been offering free financing deals or $4,000 rebates on other vehicles.

Now Hummer lags other luxury S.U.V.'s in several categories tracked by Edmunds.com, an automotive data company, including how long it takes dealers to move vehicles off their lots.

Dealers say a new pickup truck version of the H2, coming this month, the H2 S.U.T., will revive sales. They consider the H3 the brand's savior.

"We're a little edgy, yes," says Dan Frost, owner of Detroit Hummer, who is building a new dealership in Novi, Mich. "Sales are weak."

"The big thing they have us on is the H3," he said.

"We're making a big investment in the hopes this will pay off," Mr. Lynch said.

Certainly, Hummers are passionately loved and hated.

"The look is enchanting," said Arnie Bergen, 62, an Oakland, N.J., software developer and retired teacher who test drove one recently.

"It looks like a fun car that you want to get into and drive," he said. "I haven't had that experience since I was a young kid."

To detractors, they are symbols of the nation's soaring oil consumption. Hummers are so large that they are not regulated by fuel economy standards governing most vehicles.

One Web site dedicated to what it calls the "ultimate poseur vehicle" has collected 553 photographs from people all over the country giving salutes to Hummers, Hummer executives, Hummer toys and pictures of Hummers in magazines. As one might guess, these are not military salutes. The site's name cannot be printed in a family newspaper.

The Sierra Club sponsors www.hummerdinger.com, a satirical site lampooning Hummers for, among other things, getting less than half the mileage of a Model T Ford.

Buyers of luxury S.U.V.'s are not counting pennies at the pump.

"If gas was $5 a gallon, I'd probably forget about the Hummer, but if it was $3 a gallon, I'd buy the Hummer," said Mr. Bergen. "I'm not being a big shot," he added. "It's not a major issue for me."