Platinum Equity Said to Be Among Suitors for GM’s Hummer Unit
Feb. 13 (Bloomberg) -- Platinum Equity LLC, a U.S. private- equity firm that purchases distressed assets, is among the potential buyers for General Motors Corp.’s Hummer sport-utility vehicle unit, people familiar with the matter said.
Platinum, run by Flint, Michigan, native Tom Gores, is vying with a Chinese company, said the people, who declined to be identified or to name that suitor because the talks are private. The Beverly Hills, California-based buyout firm said in September it raised $2.75 billion for a new fund.
Acquiring Hummer would add a consumer brand to Platinum’s portfolio, which includes businesses such as a freight-payments processor and a maker of turf-care supplies. Platinum also has a pending deal for Michigan assets of bankrupt auto-parts supplier Delphi Corp.
“You’re really buying a nameplate,” Jim Hall, principal of 2953 Analytics in Birmingham, Michigan, said of Hummer. “For a private-equity company, you could contract out to have it built. The Russians love them. That’s a big market.”
GM is working to unload Hummer as a step toward the goal of showing its future viability to the U.S. Treasury by Feb. 17. If the biggest U.S. automaker can’t prove its ability to return to profit, it could be told to give up the loans or use the cash for a government-funded bankruptcy.
‘Decision Soon’
“GM continues to assess all its options and hopes to make a decision soon,” said spokeswoman Renee Rashid-Merem, who wouldn’t comment on any bidders. Platinum spokesman Dan Whelan had no comment.
Gores, Platinum’s chief executive officer, was ranked 163rd on Forbes magazine’s list of the wealthiest Americans in 2008. His 14-year-old firm is awaiting completion of an agreement to buy Delphi’s steering and halfshaft business in Saginaw, Michigan. U.S. Bankruptcy Judge Robert Drain in New York approved the deal in February 2008, valued by Delphi at $447 million.
Hummer might command a price of $100 million or less, said Dennis Virag, president of Automotive Consulting Group in Ann Arbor, Michigan.
“Given the volume of the brand and the economic situation, I don’t really see a tremendous value,” Virag said in an interview.
GM fell 9 cents to $2.65 yesterday in New York Stock Exchange composite trading. The shares of the Detroit-based automaker tumbled 90 percent in the 12 months before today.
GM’s 8.375 percent bonds due in July 2033 rose 1.75 cents to 14.75 cents on the dollar, according to Trace, the bond-pricing service of the Financial Industry Regulatory Authority. The yield was 56.5 percent.
Seeking Savings
Besides selling assets, GM is in talks to win cost savings from the United Auto Workers and get bondholders to whittle $27.5 billion in debt to $9.2 billion in exchange for equity as part of its survival plan.
GM has put a French factory, the ACDelco parts unit and the Saab brand up for sale and hired Bank of America Corp. and Citigroup Inc. to help with the disposals. GM is asking Sweden to guarantee $600 million in European Investment Bank loans to keep Saab operating, a person familiar with the matter said. The future of GM’s Saturn unit also is under review.
CEO Rick Wagoner said GM was considering options for Hummer, including a sale, at the June 3 annual meeting as record fuel prices prompted the automaker to shift its focus to more fuel- efficient cars away from light trucks.
Hummer’s U.S. deliveries peaked at 71,524 in 2006, according to Autodata Corp. U.S. sales of the SUVs fell 51 percent in 2008.
The least-expensive Hummer is the H3, which starts at $31,000 and, at 4,700 pounds (2,131 kilograms), is less than half the size of GM’s original 5-ton H1. That model, since dropped, was based on the all-terrain military vehicle popularized by actor Arnold Schwarzenegger, now California’s governor.
