H2 priced like Mercedes model

May 24, 2002 BLOOMBERG reported that,General Motors Corp.'s new Hummer H2 sport-utility vehicle, a smaller version of the military-style model, goes on sale in July for $48,800, putting it in a class with the Cadillac Escalade and Mercedes ML500.

The H2 is the first new Hummer model for General Motors since it bought rights to market the brand from AM General Corp. in 1999. AM General produces both the H1 military style Hummer and the new H2 for the world's largest automaker.

The model will be sold at 150 U.S. dealers chosen by General Motors, which hasn't said how many H2s it expects to sell annually. A new AM General factory in Mishawaka, Indiana, that builds Hummers has the capacity to make 40,000 vehicles a year.

"The incremental profit on this vehicle is enormous," about $15,000 each, said Merrill Lynch & Co. analyst John Casesa, who rates General Motors a "near-term buy" and doesn't own any shares. "It's unique, and the vehicle's cost structure benefits from the enormous volume of the GMT800 platform."

General Motors shares was unchanged at $65. The stock has gained 34 percent this year.

The H2 is built on the same platform as General Motors pickup trucks and sport-utility vehicles such as the Chevrolet Silverado, Tahoe and Suburban, GMC Yukon and Cadillac Escalade.

"This is an integral part of the tale of GM's truck strategy," Casesa said. "Make the basic products and then continue to make derivatives off the platform."

The strategy lets General Motors give dealers new products to sell without investing in an entirely new vehicle platform.

The Hummer H2 is priced to compete with luxury sport utilities such as the Mercedes ML500, which starts at $45,615, and the Cadillac Escalade, which starts at $49,480. The H2 has heated seats and a premium sound system and off-road capabilities to lure drivers from buying DaimlerChrysler AG's Jeep and Ford Motor Co.'s Land Rover.