Production of H1 Alpha to Cease
South Bend, Ind.--Transcript of Remarks
James A. Armour
President and CEO, AM General LLC
May 12, 2006
Good morning, ladies and gentlemen. Today AM General and General Motors are
jointly issuing an announcement regarding the future of the Hummer H1 Alpha
Many of you will recall the story that in 1989 I was invited to attend a meeting
at TACOM with the Program Executive Officer, or PEO, for military vehicles. In
that meeting, the PEO stressed his concern about the projected future funding
for Humvee and that it would be perhaps too low to sustain our production. He
therefore urged AM General to do everything that we could to find ways to
decrease the overhead, and perhaps spread it over a different product line, to
enable the plant to stay open during the lower years of production of Humvees.
Subsequent to that meeting, I took the decision on behalf of AM General that we
would launch into the commercial market by bringing the Hummer to the commercial
world. That led to the vehicle known as the Hummer; eventually it was called the
Hummer H1, and now it is known as the H1 Alpha.
We’ve had 14 very successful years of production with that vehicle. During
that 14 years our engineering organization has come up with several very
significant enhancements to the vehicle, many of which have found their way into
the production of the Humvee, helping to keep the Humvee, the military version,
the state of the art vehicle that it is today.
Unfortunately, in recent years, the production and actual retail sale of the
Hummer H1 have fallen to a level between 200 and 300 vehicles per year. At that
level of sales, the GM dealers tell us that with a vehicle that costs
$145-150,000 each, it just becomes too difficult to find customers willing to
pay for that vehicle, pay that kind of price for that vehicle, especially since
we have not been able to change the body style for the last 14 years. In the
automotive industry, a 14 year production run without a significant body style
change is very rare, very unusual.
Obviously, we cannot make a business case to put tens of millions of dollars
into an all new body to sell a few hundred trucks a year. Therefore, General
Motors and AM General, together, have made the decision that now is the time to
discontinue production of the H1 Alpha series. So effective with the conclusion
of the 2006 production run, which will be sometime this June, production will
cease on that wonderful vehicle.
Now, it would be easy for some of our employees to have an emotional reaction to
this news, and to be disturbed by it. However, I would encourage everyone to
take the positive view. We have had a remarkable success story with this
vehicle. Basically on a shoestring, we have launched this vehicle which created
a very famous worldwide brand. And as I said before we have gained several
technology improvements in our vehicle that have flowed to the Humvee. It is
time to close this vehicle out. We simply cannot make the business case to pay
for things like EPA certification, advertising, new body style, other vehicle
enhancements for such low volume production.
Now as we move forward I have a message for our employees. Especially those
employees who are in Bill Thompson’s organization who are dedicated full time
to the H1 series. I want you to know that you should not be concerned about your
job with respect to this decision. We have no plans to change any employment
levels as a result of the decision to discontinue the H1. As a matter of fact,
you know we have some 12,000 vehicles out there, and they are very durable and
highly reliable vehicles, and they will be in service for a number of years; we
will continue through the GM dealers to ensure that warranty, service, technical
manuals, training, things of that nature, are available to our customers. Also,
AM General will continue to strongly support the Hummer Owner’s Club
throughout the country. There are some hourly people who are directly affected
with this production and those people have been identified and they will be
placed on other jobs within the manufacturing organization because once again we
are increasing the Humvee production.
It would be easy for some employees to have an emotional reaction to the
decision to discontinue the Hummer H1 Alpha series. And that emotion might lead
them to want to blame GM for this. That would be inaccurate and wrong to do.
Again, this is a joint decision by General Motors and AM General, and one that
we support. During recent years, AM General in an attempt to continue the
production of the H1, has invested heavily in new technology insertion. In
particular, the incorporation of the Duramax Engine and the Allison Transmission
and several other product enhancements. That additional expense has caused AM
General to raise the price of the vehicles substantially in recent years. In
fact, over the last five years we have essentially doubled the price of the
vehicle. Obviously that has made the vehicle more difficult to sell. It simply
is time from a business case point of view to make the decision to discontinue
this vehicle, and it is no one’s fault. It’s just that we cannot make the
business case to continue, to go forward.
Now in closing, I would like to give a personal and special thank you to those
employees who have dedicated themselves and who have worked very hard to ensure
that the H1 is a success. We owe you a special debt of gratitude. And I want all
employees to adopt a positive attitude and to remember the tremendous success
story that H1 has been - a 14-year history of successful production, and
successful sales without being able to afford a new body style. Thank you and
have a good day.