GM investing $250 million to build Hummer H3

DETROIT, Oct 27, 2004; Reuters reported that General Motors Corp. said on Wednesday it will invest $250 million in its Shreveport, Louisiana, vehicle assembly plant to build the new Hummer H3 mid-size sport utility vehicle, GM's latest step to expand the Hummer brand.

The plant expansion will add more than 300 jobs to the 3,200 working at the plant, where the world's largest automaker also builds the Chevrolet Colorado and the GMC Canyon mid-size pickup trucks.

A spokesman said that GM has already made most of the $250 million investment at the plant in tooling and additional floor space to build the mid-size H3.

GM is to get a 10-year break on property taxes on the plant addition, a new rail spur and a sales-tax exemption on related equipment as part of the agreement, according to a Louisiana state economic development official. GM has not asked for any municipal bonds to be issued, the official said.

GM unveiled the smaller companion vehicle to the massive Hummer H2 at the California auto show in Anaheim on Wednesday.

The H3 will go on sale in the second quarter next year and will be the Hummer brand's largest seller, GM executives said.

The H3 will be about 16 inches shorter and weigh about 1,700 pounds lighter than the H2, which has been derided by environmentalists because of its poor fuel economy.

"The H3 will deliver much improved fuel economy, which mid-sized utility customers have come to expect," Hummer General Manager Susan Docherty said at the auto show.

The H3 will get about 20 miles per gallon on the highway and about 16 miles per gallon in the city, comparable to other similarly-sized SUVs. The H2 averages about 12 miles a gallon.

Still, the environmental group Natural Resources Defense Council said GM is missing out on the growing market for hybrid gasoline-electric vehicles, which burn less gas.

"Sure, some people will buy this truck," said Roland Hwang, chief motor vehicle analyst at NRDC. "The question is whether and how long GM can stay afloat while ignoring the new market reality of growing oil dependence and rising pump prices."

Average gasoline prices have topped $2 a gallon across the country, but GM officials said that the spike still hasn't caused a noticeable shift in sales, and SUVs continue to sell well. H2 sales are down about 20 percent so far this year, however.

"This (Hummer) brand isn't for everyone, which quite frankly, is one of its strengths," Gary Cowger, president of GM North America, said at the auto show in Anaheim. (Additional reporting by Michael Connor in Miami)