September 5th, 2008
Viper may speed past Hummer–on the block
Post a commentPosted by: Jui Chakravorty
Tags: DealZone
It’s fast, it’s mean, and it’s sexy.
With a base price of nearly $90,000, it happens to be the priciest model in Chrysler’s otherwise quotidian product line-up.
Now it’s up for auction.
At a time when General Motors is trying to sell the Hummer SUV line – and not getting very far – it must take courage to put something on the block.
But unlike the lumbering, gas guzzling Hummer line, Viper may not be such a tough sell.
Unlike a Hummer, the Viper is not designed for off-road use. It’s no paragon of fuel-efficiency either, but it gives you a unique, luxurious handcrafted vehicle.
Another difference: Hummer’s sales plunged 40 percent in the first half of this year. Viper’s sales have risen 111 percent so far. Okay, that exorbitant rise is mainly due to a weak comparison — Viper’s 2007 sales had plunged amid a transition to a new model. But sales of Viper, like most cars in the high-end category, are not as affected by the macroeconomic factors that hurt vehicles sales (gas prices, interest rates, housing market). Sales of Hummer, which gives you 9 to 14 miles a gallon in fuel (in)efficiency are severely dependent on oil prices.
So Viper sales are likely to stay stable.
Moreover, it’s a much smaller asset than Hummer. Analysts have said it will likely fetch $100 million. (Yes, it’s a small deal but any move the U.S. automakers make in these turbulent times is being closely watched. )
Unlike Hummer, which is likely to be sold for much less than it’s worth, the Viper business will appeal to a whole host of investors because we aren’t talking billions of dollars. The Indian automakers, Chinese automakers, Middle Eastern sovereign wealth funds or a wealthy entrepreneur — can all afford it. Easily.
Chrysler, majority-owned by Cerberus Capital Management, has faced scrutiny over its ability to ride out a downturn in U.S. auto sales that many analysts expect will stretch through 2009. It lost $1.6 billion in 2007. Selling brands and models it can do without is crucial to its survival and eventual health.
Chrysler CEO Bob Nardelli has said last week the automaker has heard from several potential suitors, but he’s not naming names.
A steep downturn in auto sales is finally forcing the Big Three to take a harder look at their businesses and start getting rid of assets to shore up cash and cut costs. How successful any of these sales will be remains to be seen. But Viper is certainly likely to be an easier — and quicker — sale than Hummer
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Originally Posted by mr4teth
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