For sale: Hummer, baggage included

Even as it approaches a possible bankruptcy, GM says it's closing in on a sale of its tough SUV brand.

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By Peter Valdes-Dapena, CNNMoney.com senior writer

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GM could continue to make vehicles like the H3T for Hummer's new owners to sell.
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GM touts Hummer's dealer network as a valuable asset.

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NEW YORK (CNNMoney.com) -- With three bidders in the running, General Motors says it is weeks away from deciding what will become of the controversial Hummer SUV brand, but as a bankruptcy looms, one expert wonders why bidders don't just hold out for a bargain in a court-ordered sell-off.

"I don't know why you would do it in advance," said Doug Bernstein who heads the bankruptcy practice for the Michigan law firm of Plunkett Cooney.

GM says it has three serious offers for the Hummer brand. The three offers range from $100 million to $200 million, according to Reuters but GM would not confirm those figures.

In an ordinary asset sale, GM can dictate what's included in the package and what isn't. In this case, the sale includes rights to the Hummer brand name and the Hummer dealer network. It does not include any manufacturing facilities.

If GM (GM, Fortune 500) files for bankruptcy - something that is still not certain - buyers could comb through what essentially would be a yard sale of assets and bid for whatever they want for them.

For instance, a buyer might just want the brand, but not the dealer contracts. Or it might want the rights to the Hummer brand only in certain markets. In bankruptcy a buyer might even be able to pick up the factory where the trucks are made, an asset GM now says isn't for sale.

Also, a sale outside of bankruptcy is open to legal challenges by spurned bidders and others.

"It makes you more open to the charge by interested parties that the process wasn't fair." Bernstein said.

A bankruptcy asset sale, which will have a court's approval, would be largely immune from such charges of favoritism, he said.

GM says that its three Hummer bidders are not waiting to see if there's a bankruptcy filing, said GM spokesman Richards.

These three aren't the only bidders there have been, said Richards. The fact that they're still around shows their seriousness.

"If they're willing to wait and see, I think a lot of those types of bidders have been ruled out," said Richards.

Products and showrooms

These bidders want exactly what GM is offering, Richards said. Waiting for a bankruptcy court bidding war could mean facing more competing buyers looking for a bargain and, ultimately, not getting what they're after.

Even after selling the brand, GM might not be out of the Hummer business altogether.

"GM might continue to manufacture Hummers," said GM spokesman Nick Richards, "just not continue to sell them."

GM currently makes only two Hummer models, the H3 midsized SUV and the H3T pickup version The Shreveport, La., factory that builds both is not for sale because it also produces the GMC Canyon and Chevrolet Colorado pick-up trucks. So GM would continue make the H3 and H3T there under contract.

The larger H2 remains part of the Hummer product mix but production of that vehicle has been stopped since December due to high inventory levels. The H2 is produced by A.M. General, the company that makes military Humvees, under contract to GM.

A small Hummer concept vehicle, about the size of a Jeep Wrangler, was revealed at the Detroit Auto Show last year. A version of that vehicle may be part of the Hummer product plan that GM is sharing with potential buyers.

The Hummer dealer network is an important part of the package for these bidders, none of which are in the auto business now, Richards said.

"If you're buying the brand, you have to have a means of selling the vehicles," he said.

Dealerships are independently owned businesses but a Hummer buyer would take on the franchise agreements GM has with those dealers. Strict state franchise laws would make it difficult for a buyer to selectively keep some dealers and close others, so the dealers network is essentially an all-or-none package.

While dealer networks for other GM brands, like Chevrolet and Buick, include too many locations and many older, run-down facilities, there are only 153 Hummer dealers in the U.S. and 71 elsewhere in the world. All are relatively new, said Richards, and have undergone recent make-overs to give them a uniform look inside and out.

Hummer made its name with big vehicles like the lane-hogging H1 and the full-size H2 but for this brand, one major selling point is its small size, said Richards. For investors just getting into the market, Hummer is a manageable brand to start with. Hummer might not be to everyone's taste, but it has a loyal following of enthusiasts.

"Picking a small brand means you don't have to sell hundreds of thousands of units to be profitable," he said. To top of page

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