China may reject purchase of the Hummer

By Zheng Lifei and Tong Hao (China Daily)
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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GM finds Chinese buyer for Hummer

Bankrupt US car giant General Motors has announced a tentative deal to sell the Hummer brand of sport utility vehicles to a Chinese company. AM General will still manufacture the Humvee for the US military.

The deal announced on Tuesday will see the brand sold for to Tengzhong Heavy Industrial Machinery Company, based in the southern Chinese province of Sichuan. The Chinese government has not yet cleared the sale.

GM said in a statement that it has a memorandum of understanding with the company regarding the sale.

Bankers have previously estimated that the Hummer brand and assets could fetch about $100m in cash and some other commitments.

The sale of Hummer is part of an effort by the Detroit-based firm to drop four unprofitable GM vehicle lines with the desire to emerge from bankruptcy as a leaner company.

A top official for GM said Tengzhong would not only continue to produce the Hummer model, it would also develop an environmentally friendly version.

Tengzhong said the Chinese domestic market will play an important role in its global strategy.

"The company's strategy is to go global with the Hummer brand global and that will include the Chinese market," said a public relations spokesperson.

Tengzhong and GM said in a joint statement that "the team intends to expand Hummer's dealer network worldwide, particularly into new and under-served markets such as China".

The sale is still subject to regulatory approval. This is the first time that a Chinese buyer has acquired a brand from a US vehicle-maker.

If it clears both China and the US, more than 3,000 jobs would be saved at Hummer factories and dealerships across the US.

Tengzhong will retain Hummer's senior management and operational team. The company will also enter into a long-term contract assembly, component and material supply agreement with GM.

In the Hummer plant in Shreveport, Louisiana has 800 workers who work on a single shift. Union workers expressed relief that a new buyer would keep the line up. ."We're just excited that Hummer may live on," said Morgan Johnson, local president of the United Auto Workers union.

Chinese parts suppliers and automakers have shopped for other US automotive assets, including those at Chrysler, but the Tengzhong deal appears likely to become the first to be completed.

Sichuan-based Tengzhong makes special-use vehicles, highway and bridge structural components, construction machinery, and energy facilities.

Hummers, originally built by AM General, were initially designed as multipurpose, off-road military vehicles.

The first model produced was the H1 Humvee, which spun off into the civilian Hummer brand bought by GM in 1999. The H1 was so large in would not fit in many home garages or parking garages at work. It was followed with progressively smaller models: the H2 and the H3.

But soaring fuel prices and the impact of the credit crunch have hit sales with consumers in many key markets turning against the Hummer, seen as a symbol of 20th century excess with its macho styling and poor fuel economy.

AM General still makes the Humvee for the US military.

english.aljazeera.net/news/asia-pacific/2009/06/20096321215729673.html 

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China View of the Hummer Sale

Hummer bid hurdles still remain, experts say
By Li Fei (China Daily)
Updated: 2009-06-16 08:08

Sichuan Tengzhong Heavy Industrial Machinery may still have to overcome many hurdles to win regulatory approval for its controversial acquisition bid for the Hummer brand even after a crucial ministry signaled no rejection.

Tengzhong's bid for the now bankrupt US car giant General Motor's Hummer brand is "rational and normal" given the current global financial crisis, Yao Jian, a spokesman for the Ministry of Commerce, told reporters yesterday.

Yao said his ministry, a key government body that has a say in the approval of Tengzhong's bid, had not yet received any application from relevant parties.

This is the first official remark concerning the deal, which has aroused heated debate in the country on whether the virtually unknown makers of special-use vehicles and bridge and highway components has the industry expertise and resources to turn the Hummer business around.

Hummer bid hurdles still remain, experts say Hummer buy a rocky road for obscure China firm. While the provincial government of Sichuan, where Tengzhong is based, is keen to see the deal go through to raise its profile, the central government has the final say.

And analysts said the government, which has identified energy saving and efficiency as one of its key tasks, is unlikely to grant a go-head to the deal.

"We cannot interpret (the spokesman's) comments as a signal that government will let the deal go through, as there are other powerful bodies involved, such as NDRC (National Development and Reform Commission)," said a senior industry watcher, who asked not to be named.

"NDRC, which has been the advocator of energy efficiency and savings efforts, is very unlikely to approve the deal as it may invite public outcry," the analyst said.

But analysts said even though the image of the gas-guzzling Hummers might not fit with China's energy saving efforts, the market for the iconic off-road sports utility vehicle (SUV) was still large in the country.

"Like it or not, Hummers will still find many buyers here", said Jia Xinguang, an independent auto industry analyst.

China is the bright spot for luxury carmakers such as Porsche SE, amid the global financial crisis.

China may pass Germany as its second-biggest market within three years, said Helmut Broeker, Porsche's China head.

http://www.chinadaily.com.cn/bizchina/2009-06/16/content_8287836.htm