Why Mahindra Didn't Buy Hummer

It is indeed ironic that an American automobile company caught in one of their worst ever financial tangles had to resort to asking the help of an Indian automobile company. General Motors were hoping that they’d be able to persuade Mahindra and Mahindra Auto to purchase their well known ‘Hummer’ brand. An idea that took effect after another Indian company in Tata motors broke the glass ceiling and purchased Jaguar and Land Rover from Ford. A decade earlier would have seen the exact situation, except an Indian company would be the one trying to sell its franchises off.

For General Motors this move came as a significant jolt. The auto industry was ripe with rumors that M&M would indeed buy out Hummer if GM offered it to them at a good price. On Monday however Anand Mahindra of M&M made a categorical statement finally ending the suspense once and for all. There was no way his company would be interested in acquiring Hummer.

This statement brings to end the speculation for GM and it is disappointing for them. The US auto maker has been plagued by one problem after another. At first their sales fell after consumers became disinterested with their stale products. Then the fuel crisis hit which impaired the entire auto industry. The worst part of it all was some time back when GM announced that it had decided to suspend paying out dividends to its share holders in an effort to save about a billion dollars.

For Mahindra, the purchase of Hummer would have been more of a liability. The vehicle is way too big and consumes a lot of fuel. The brand was seen as a franchise that would perhaps only interest those who could afford it. People in India would never be able to view the Hummer as a utility vehicle. They’d have associated it with a luxury sector brand.

This was the decision that mattered the most to M&M. The prolonged growth of any brand will happen more in India and China. With the Tata Nano set to launch in a few months, the last thing they’d be expected to do is to introduce an extremely costly, gigantic, fuel inefficient vehicle in a money minded economy.

Given the current fuel crisis, the state of Indian roads and the high cost of the Hummer; it was the best decision for Mahindra to have not pursued Hummer and one that is good news for their shareholders.

Mahindra are in a state of expansion worldwide. They plan to release sturdy and trendy utility vehicles in the US and Europe.Mahindra’s utility vehicles have made the company the giants they are today. The idea is to offer similar products at reasonable rates to different markets starting from the United States. Buying out Hummer would have created a conflict for Mahindra with vehicles from the same brand eating into the other's gains.

It is better to pass their products as cheaper, better and contemporary, fuel efficient utility vehicles which are better than the Hummer and that is what they will be doing in the coming months.

Perhaps General Motors can borrow a page out of M&M’s book and make better products instead of trying to sell off those that aren’t.