When we last left GM, they were pursuing buyers for Hummer and Saturn (see “GM in talks to seel Hummer to China “” the second mistake by those clueless new owners?“). So of course, the smaller-car brand dies, but the 7,000-pound gas guzzlers live. WashPost reports:
General Motors has reached an agreement to sell its Hummer brand to Sichuan Tengzhong Heavy Industrial Machinery….
It recently announced that it would wind down the Saturn brand.
The price for Hummer was not disclosed, but according to sources familiar with the negotiations, it was $150 million, far less than the $500 million price once envisioned.
Seriously, $150 million? As I wrote back in June:
Less than $500 million? That’s a rounding error in the cash giveaways to the auto industry these days. Why couldn’t we just swallow that cost to forever remove from the planet this unsustainable blight? Who are these clueless new owners of GM anyway? Oh. Never mind!
But WashPost buried the lede:
Tengzhong’s quest to acquire Hummer has been seen by many as a test of China’s commitment to reining in emissions of greenhouse gases. Some observers expect China’s regulators to bar the acquisition.
The Hummer sale story isn’t really news — but if Chinese regulators actually stopped the acquisition, that would be quite a story, though perhaps not an utter shocker (see “China begins transition to a clean-energy economy“).
I wrote back in June:
The big execs at GM always viewed Saturn as a skunk works, as an effort to show that the “GM way” doesn’t work, so they did everything possible to kill it…. When I wanted to buy an American car in the mid-1990s, I settled on a Saturn, which was a terrific car for me for 10 years. Had GM not abandoned at the start of the Bush administration the hybrid vehicle development program the Clinton administration started with them in the early 1990s, Saturn might well have had a good hybrid by the time I was looking for a new car. But they didn’t. And so I bought a Toyota Prius….
As for Hummer, I suppose you could argue that if China plans to build obscenely big gas guzzlers, they could do so on their own with or without Hummer. And you can certainly argue that once peak oil kicks in big-time over the next 5 to 10 years, and oil prices shoot over $5 a gallon, nobody is going to be terribly interested in Hummers, which suggests GM/Obama/you-and-I are smart [not dumb?] to get some money for it.
Perhaps, but as one of the owners of GM, I’d very much like to know what this “less than $500 million” price was. If it was a lot less, then this sale is unjustifiable on any grounds.
I think the whole brand should have been shuttered. And if the Chinese wanted to spend many billions of dollars building their own production capacity for gas guzzlers, let them. But that’s no reason for us to act as Dr. Kevorkian in this unsustainably suicidal behavior. My buyer’s remorse grows!
What do you think?
This sale is unjustifiable at $150 million. Let’s hope the Chinese government is smarter than ours.
Related Posts:
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- Climate competitiveness 2: When the global Ponzi scheme collapses (circa 2030), the only jobs left will be green
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Language Intelligence: Lessons on persuasion from Jesus, Shakespeare, Lincoln, and Lady Gaga
Not a smart move indeed. The first attempt by the Chinees to sell an SUV under market prices (14995 euro) resulted in a rolling death trap. With Hummers expertise they will succeed in bringing an SUV to market at a compatible pricing.
So lets hope the Chinees heath the call of the time and listen to the vioce of Gaya softy screaming into their ears and sour up the deal. Question is if a sort of communist dictatorial government is able to stop the deal and a recent Nobel peace price lauriat is not, how much trouth lies in the words of Thomas L. Friedman in his chapter “China, for a day” in “Hot, flat and crowded.
Greetings, Ed
Off topic:
Joe, would you be interested in doing a piece on this absolutely atrocious article that has appeared on the BBC from their ‘Climate correspondent’, Paul Hudson – http://news.bbc.co.uk/1/hi/sci/tech/8299079.stm
It’s absolutely stuffed with Denier talking points and continually draws false equivalence between unnamed ‘sceptics’ on one side and credible climate science on the other.
I’ve dumped a long reply on Hudson’s blog, where this piece also appears: http://www.bbc.co.uk/blogs/paulhudson/2009/10/whatever-happened-to-global-wa.shtml#P86902569
As a CPA I can tell you one major reason why you see so many large pickups and SUV’s on the road even after last year’s gasoline price shock: Congress forbids businesses from writing off the full cost of a light-weight vehicle, but allows businesses to write off in full (usually in the first year!) the entire cost of a heavy (over 6,000 lb Gross Vehicle Weight) vehicle.
Example: Business owner Sam doesn’t really need a heavy truck for his business, since he just drives around and talks with customers and doesn’t haul any heavy equipment.
If Sam buys a fuel-efficient hybrid, it is a lighter-weight vehicle thus he has bought what the Tax Code automatically designates as a “Luxury Automobile”, which for 2008 had a limit of regular depreciation expense of $2,960 for that year. It is not eligible for immediate write-off of the full purchase price, which is a big deal given the time value of money.
Regular depreciation for vehicles stretches over six tax years — during which Sam can only deduct a total of $15,935 for buying that hybrid, during the normal life of a car. Sam can’t buy a new car for that, so he is forced to swallow the difference (probably about $10,000) and not be able to fully write off a fuel-efficient (lighter weight) vehicle.
If instead Sam buys a $35,000 HEAVY truck (that will probably get only about 15 mpg), Sam IS allowed to write off the FULL $35,000 in the very first year as a tax deduction against his business income. This is a huge tax break, very valuable since it happens immediately, so Sam as an astute business owner is going to buy the HEAVY vehicle, even though he doesn’t need one. The huge tax break far outweighs the extra gas costs Sam has to pay.
Even Hummers — by cultural definition a true luxury vehicle — are by the Tax Code NOT considered a “Luxury” vehicle and will get huge tax deductions for businesses who buy them.
Business owners are social trend setters so if the boss shows up in a heavy gas guzzler truck, this affects everyone else. (Just try to show up to work at a construction site driving a “sissy” hybrid or light truck.)
What to do about this ridiculous, climate-destructive, and outdated tax preference for heavy gas guzzlers?
Obama’s new fuel-efficiency standards won’t help, since they don’t cover the heavy vehicles.
You will NOT be able to eliminate the immediate tax writeoffs for heavy vehicles — you would instantly have every contractor in the country on your backs.
However, Congress could easily allow the SAME immediate-writeoff provisions (with no artificial limits) for lighter-weight vehicles, and allow Sam to buy an efficient lighter weight car or light truck, and get a full business deduction when he buys it.
The two tax-writing committees (House Ways & Means, and Senate Finance Committee) are not big on climate policy, so we haven’t seen this even discussed yet.
Don’t expect any big changes to our fleet of gas guzzlers until this tax code dinosaur is fixed.
Craig Severance (3) — I do hope you can communicate that to your members of congress.
It is a shame that Saturn is gone forever. I hope the Hummer deal falls apart I would rather see Hummer go away than have it in the hands of the Chinese.