Reporting from New York—Bankrupt General Motors Corp. said today that it had reached an agreement to sell its Hummer brand of sport utility vehicles to an undisclosed buyer.
The automaker, which filed for Chapter 11 protection on Monday, reported the sale in a filing to U.S. Bankruptcy Court in New York.
GM has been trying to sell the brand for a year and has said it is negotiations with interested parties for several months. The automaker said the sale would likely be completed in the third quarter of this year and could save 3,000 jobs.
"I'm confident that Hummer will thrive globally under its new ownership," said Troy Clarke, GM head of North American operations. "And for GM, this sale continues to accelerate the reinvention of GM into a leaner, more focused and more cost-competitive automaker."
The Detroit automaker was loaned $19.4 billion by the government prior to declaring bankruptcy this week and is expected to receive an additional $30.1 billion from the Treasury Department to fund its restructuring.
In its first day in court, GM outlined a plan to sell "substantially all" of its assets into a new company that will be bid on by the federal government. It will leave behind the bulk of its $74 billion in debts and will emerge from the process a smaller company, with fewer dealers, employees, plants and brands.
In addition to Hummer, GM is attempting to sell or wind down its Saturn and Saab brands. It will close down Pontiac.
Saturn and its distribution network also filed for bankruptcy protection on Monday.
GM's chief financial officer, Ray Young, said today that it was in negotiations with 16 potential bidders for Saturn and three for Saab, which is in bankruptcy in Sweden. He did not identify those parties.
Dealers holding franchises in those brands face losing their businesses unless buyers are found. Going forward, GM plans to focus on its Chevrolet, Cadillac, Buick and GMC brands alone in the U.S.
GM has plans to eliminated 2,600 of its roughly 6,100 U.S. dealers and last month sent letters to 1,100 of them informing them that it would not renew their franchise contracts upon their expiration in October of next year.
Young said that, starting today, those dealers would receive new letters offering to make "support payments to help with an orderly wind-down" of their stores. The executive said that it would ask the bankruptcy court to terminate its contracts with any dealers who refuse to sign these "participation agreements."
GM is expected to notify as many as 450 more dealers of its intention to cease doing business with them in coming weeks.
In anticipation of dealer network shrinkage, as well as continued slow sales, GM last month idled most of its North American production capacity until mid-July. It hopes to significantly reduce its inventory in the process.
GM is also in the process of selling its European Adam Opel unit, including the Opel and Vauxhall brands, to Canadian parts maker Magna International.
The automaker's bankruptcy process is expected to take from two to three months, after which the government will hold a 60.8% stake in GM. The government of Canada, which is lending up to $9.5 billion to GM, will own 11.7%. The United Auto Workers will have 17.5% of the new company, and holders of $27 billion in the automaker's bonds will receive a 10% stake in exchange for forgiving their debt.
GM is in the process of selecting a new board of directors. The automaker said that five of the current 12 directors would stay on with the company. The UAW will have the right to seat one new board member, but all board seats will get final approval from the U.S. government.
It is not yet clear whether interim Chairman Kent Kresa will continue in that role.
The Hummer brand, once a cash cow for GM, came to represent a symbol of the company's misdirected priorities and lack of balance as gasoline prices spiked over $4 nationwide a year ago.
Still, Hummer has a nationwide network of dealers and a highly loyal customer base, and it could be an attractive toehold in the U.S. market for a foreign buyer without a distribution in the world's largest auto market.
Speculation has flown that the buyer could be an Indian automaker such as Mahindra, for example, although that has not been confirmed.
The sale was coordinated with the help of Citi Group, the automaker said.
GM said that, under terms of the deal to sell the brand, it would continue to produce the Hummer vehicles as a contract manufacturer in existing plants such as its Shreveport, La., facility.