Gm - Downsizing the Hummer

GM: Downsizing the Hummer

A Little Military History

Quickly. What is a "High Mobility Multi-Purpose Wheeled Vehicle"? Well, if you've kept up with Arnold Schwarzenegger films or studied the 1991 Gulf War, you may have recognized the formal military description of what soldiers describe using the acronym "Humvee." If you don't really know what a Humvee is, just stand by - General Motors is going to tell you.

This story starts in 1979, when AM General, a specialty vehicle manufacturer, earned a contract from the U.S. Army to design the Humvee. The Army wanted a new vehicle to replace the Jeep, the ever-present multipurpose vehicle that had transported generations of soldiers. The Army believed it needed a more modern, up-to-date vehicle to meet needs of the modern soldier. AM General produced the big, boxy Humvee, which labored in relative obscurity until the Gulf War in 1991. In that war, the United States and its allies mounted a military operation against Iraq, which had just invaded Kuwait. Television coverage of the military buildup in advance of the short war and live broadcasts of the war itself introduced the public to the workhorse Humvee.

In 1992, AM General, responding to the Humvee's notoriety, decided to introduce the first civilian version of the Humvee - the Hummer. Weighing in at 7,100 pounds, the Hummer featured a huge, 6.5 liter V-8, turbo-diesel engine that produced 195 horsepower and propelled the Hummer from 0 to 60 miles per hour in a snail-like 18 seconds. But the Hummer's purpose was not speed. AM General designed it, like its military parent, to take people off the beaten path - way off. The Hummer could plow through water to a depth of 30 inches and climb almost vertical, rocky surfaces. It even had a central tire inflation system that allowed the driver to inflate or deflate the vehicle's tires while on the move.

The advertising tag line dubbed the Hummer "The world's most serious 4x4," and ad copy played up the vehicle's off-road capabilities and its military heritage. AM General targeted serious, elite road warriors who were willing to pay more than $100,000 to have the toughest vehicle in the carpool. These were people who also wanted to tell the world that they had been successful. To help buyers learn how to handle the Hummer in extreme off-road situations, AM General even offered s Hummer Driving Academy, where drivers learned to handle 22-inch vertical walls, high water, 40 percent side slopes, and 60 percent inclines.

GM's Market Research

In 1998, GM was conducting market research using a concept vehicle that it described as rugged and militaristic. When the vehicle bore the GMC brand name (GM's truck division), the company found that consumers had a lukewarm reaction. However, when GM put the Hummer name on the vehicle, researchers found that it had the highest and most widespread appeal of any vehicle GM had ever tested. Armed with this insight, GM turned to AM General, which had just abandoned acquisition discussions with Ford Motor Company. In December 1999, GM signed an agreement with AM General giving GM rights to the Hummer brand. AM General also signed a seven-year contract to produce the Hummer H2 sport utility vehicle for GM.

Based on its research, GM believed that the Hummer H2, a smaller version of the Hummer, would appeal to rugged individualists and wealthy baby-boomers who wanted the ability to go off-road and to "successful achievers," thirty- and forty-something wealthy consumers who had jobs in investment banking and the like. GM believed that it could introduce the H2 in the luxury SUV market and compete successfully with brands such as the Lincoln Navigator or GM's own Cadillac Escalade. The company charted production plans that called for AM General to build a new $200 million manufacturing facility in Indiana and for GM to launch the H2 in July 2002 at a base sticker price of about $49,000. It predicted that it could sell 19,000 H2s in 2002 (the 2003 model year) and then ramp up production to sell 40,000 units per year thereafter - a number that would make the H2 the largest seller in the luxury SUV market. Further, GM planned to introduce the H3, a still smaller and more affordable version of the Hummer in 2005. It believed it could sell 80,000 units of the H3 per year. These numbers compared with annual sales of only about 800 Hummers.

Softening Up the Market

During 2000, GM and AM General did not advertise the Hummer, but they mapped out a campaign for the year leading up to the H2's 2002 introduction that would raise awareness of the Hummer brand and serve as a bridge to the introduction. GM hired a marketing firm, Modernista, to develop the estimated $3 million campaign. Modernista found that the Hummer had about a 50 percent awareness level among buyers of full-size SUVs, mainly due to its appearance in movies. AM General had been spending less than $1 million a year on advertising and promotion. Further, 13 to 20 percent of these buyers had considered the Hummer.

In mid-2001, GM launched the Modernista campaign using the tag line "Hummer. Like nothing else." Placements in The Wall Street Journal, Barron's, Spin, Business Week, Cigar Aficionado, and Esquire used four different headlines:

"How did my soul get way out here?"

"What good is the world at your fingertips if you never actually touch it?"

"You can get fresh air lots of places, but this is the really good stuff."

"Out here you're nobody. Perfect."

Following each headline was the same copy: "Sometimes you find yourself in the middle of nowhere. And sometimes in the middle of nowhere you find yourself. The legendary H1." One agency official said the ads used journalistic-type-photography to make them more believable and to play down the he-man imagery. "Authenticity is probably the most important word when it comes to branding,"