Profiting From War - Washington Post

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Profiting From War


By Warren Brown
Washington Post Staff Writer
Friday, April 11, 2003; 12:53 PM


It's a little embarrassing.

No one wants to profit from war; at least, no one wants to admit it.

But profits are flowing into General Motors Corp.'s Hummer Division, largely because its Hummer H2 sport-utility vehicles, at prices starting from $48,455, are selling faster than U.S., British and Kurdish forces are taking over Iraq.

Even sales of GM's super-gargantuan Hummer H1 SUVs are up 21 percent for the calendar year; and those transports are priced from $105,160 to $116,483.

More striking is that sales of those big-money big-rigs are increasing while overall car and truck sales are declining in the United States.

Part of the reason is what some Hummer dealers around the country are calling "the CNN effect." That's CNN as in Cable News Network's round-the-clock coverage of the war in Iraq, a fascinating bit of reality TV in which the military Humvee-the parent of the Hummer H1 and H2-is the leading automotive character.

"Every time you turn on CNN, you're looking at a Humvee rolling into some part of Iraq," said Glen Cardelino, general sales manager of Capitol Hummer in Greenbelt, Md.

Cardelino said that sales of the less-expensive, more civilian-friendly H2 have been strong since GM introduced that sports utility vehicle in July. But the war coverage seems to have sustained that momentum at a time when other vehicle sales are falling, he said.

"Hummer H2 sales are incredibly off the charts," said Cardelino, whose dealership has sold 300 H2 models at an average price of $55,000 with options.

Not only are consumers buying Hummers, they're also buying Hummer T-shirts and coffee mugs and other Hummer paraphernalia. "And we're getting more people who are asking us to put military trim [that means decorations in auto industry parlance] on their Hummers," Cardelino said.

The same thing is happening at Winkel's Rod Hall Hummer in Reno, Nev.

"We have sold every Hummer H2 we could get our hands on," said Chad Hall, the general sales manager. "But we were selling every one we could get before the war. So it's hard to say that the war coverage is having a positive effect on sales that are already going gangbusters."

But it hasn't hurt, has it Chad?

"No," he said. "It doesn't hurt at all to see those Humvees on television all day and night."

If you think this is a testosterone-laden guy thing, think again.

"Women are our biggest H2 buyers," said Hall. "They are using them as their daily drivers. It's a vehicle that's intimidating on the outside; but it's really comfortable and easy for them to handle. They like that."

Said Cardelino: "We have husbands coming in here to buy Hummer H2s for their wives. The guys think the H2 is a softer version of the H1. But we've had a few husbands who gave an H2 to their wives, then decided they liked it themselves, and came back and bought a second one."

At $55,000 a pop for a vehicle that averages 10 miles per gallon?

"Yes," said Cardelino. "We've heard back from just about every customer who bought one from us. They say they absolutely love the thing."

GM executives at the Hummer Division in Detroit are quietly ecstatic about all of this; but they are also a little nervous about the war implication.

"We haven't seen any relationship between CNN's coverage of the war and Hummer sales," said Heather Hall, a spokeswoman for Hummer. She said the division's numbers show that H2 sales "have been strong all along."

Hummers are produced under a cooperative arrangement between GM and AM General. Heather Hall said that the division has the capacity to produce about 40,000 Hummers a year and is on track to do that this year.

H2 sales totaled 3,924 in December 2002, fell to 2,810 in January and to 2,664 in February. But March sales roared like a lion, climbing to 3,014. Many Hummer dealers believe H2 sales will continue at the 3,000-plus pace, because gasoline prices are coming down and a victorious U.S. military is expected to come home.

The very expensive H1, whose sales always have been small, is the apparent beneficiary of the H2's success-and the Humvee's war-related TV exposure.

GM sold 55 of the Hummer H1 models in December, 2002. The company sold 47 H1s in January, 50 in February and 55 in March.

"We aren't selling that many H1 models," said Cardelino. "But we have a number of people with H1s who are keeping them and coming back to buy an H2."

America! What a country!