Updated: 2009-06-26 08:15
A key government agency is inclined to reject Sichuan Tengzhong Heavy Industrial Machinery's controversial bid to buy the Hummer brand from bankrupt US car giant General Motors, China National Radio (CNR) reported yesterday.
The National Development and Reform Commission (NDRC), the nation's top economic planning body, may reject the deal on the grounds that Tengzhong lacks the expertise and resources to run Hummer's operations, and that the gas-guzzling brand does not fit in with the country's energy-saving policy, CNR reported, without citing sources.
The NDRC is a key government body in approving the Chinese company's overseas acquisition deal.
Only the Ministry of Commerce, which together with the State Administration of Foreign Exchange is also involved in approving such overseas acquisition deals, has made public comments about the deal.
Tengzhong's bid is "rational and normal" given the current global financial crisis, Yao Jian, a spokesman for the Ministry of Commerce, said last week.
But Yao said his ministry had not yet received any application from relevant parties.
Sichuan Tengzhong Heavy Industrial Machinery, a special-use vehicles and highway components maker, announced its intention to buy the Hummer brand early this month, immediately drawing public ire.
"Buying a fuel-hungry and high-emission brand is directly against the current trend of energy saving and emission reduction," said Lu Zhongyuan, deputy director at the Development Research Center of the State Council, the country's cabinet, at a forum earlier this month.
But the little-known Tengzhong has repeatedly said that it has the financial resources and expertise to clinch the deal.
"We have the financial resources for the Hummer deal from our own sources and also funding from some financial institutions," its general manager Yang Yi said last week.
Both GM and Tengzhong have refused to disclose the financial terms of the deal, which has not been formally signed yet.
Analysts have estimated the deal size at between $100 million and $500 million.
Chinese website Sina.com reported yesterday that the two sides were planning to formally sign the deal on June 28, citing unnamed sources.
But a person with knowledge of the matter yesterday denied the same to China Daily saying, "such talk is groundless rumor".
The government is encouraging domestic firms to go abroad, while also stepping up its regulation of overseas acquisitions after some recent deals incurred losses.
Last week, the NDRC issued a notice requiring Chinese companies to report intended overseas acquisitions to the government before they sign any legally binding contracts.
www.chinadaily.com.cn/bizchina/2009-06/26/content_8325257.htm
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