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22 April 2024

Tengzhong may ride on offshore vehicle to buy Hummer

Hummer's image as a petrol-guzzler is hurting its chance to be rescued by a Chinese company. (GETTY IMAGES)

By Reuters

China's Tengzhong could use an offshore vehicle to buy GM's Hummer brand if it fails to win Chinese regulatory approval for the ambitious but controversial plan that has met with cooling government appetite.

Sichuan Tengzhong Heavy Industrial Machinery, a little known construction machinery maker with no experience in the auto industry, had started communicating with Chinese regulatory bodies after signing an initial deal with General Motors in October 2009.

The partners had to push back the deadline of the deal to the end of February from a previous deadline of January 31. However, China's Ministry of Commerce, which is responsible for the approval of outbound investment by Chinese companies, has repeatedly said it has not received an application from Tengzhong for approval of the purchase.

One source said earlier this month that the chances of having the deal approved had fallen to 50-50, adding that the Hummer's image as a petrol-guzzler was working against it as Beijing pushes for a greener economy and the global trend shifts to more environmentally-friendly, low-emission cars.

"Tengzhong has not given up hope yet to win government approval, but buying Hummer through an offshore investment vehicle could be an option if it can't get the green light," said a source close to the deal.

Support from Beijing has been critical for Chinese firms that have embarked on a series of deals to pick up distressed assets from a global auto industry reeling from overcapacity and sharply depressed demand during the worldwide recession.

Beijing Automotive Industry Holding Corp (BAIC), China's fifth-ranked automaker, closed its $200 million purchase of technology platforms from GM's Saab in just two weeks.

Zhejiang Geely Holding Group's bid to buy Ford's Volvo car unit has been progressing smoothly, according to sources and documents.

Zhejiang Geely is the parent of Hong Kong-listed Geely Automobile Holdings.

Acquiring Hummer through an offshore vehicle would only be possible if the production base of the off-road sport utility vehicle remains outside China.

New entrants need to get vehicle production licences from the government before building plants in China.

According to the original October agreement, GM's plant in Shreveport, Louisiana will continue to assemble the H3 and H3T.

A plant in Indiana operated by AM General will continue to produce the older H2 model. Tenzhong has not ruled out having a plant in China in the future.

"It seems that Tengzhong is really interested in Hummer and is trying everything it can in order to get the deal down," said Boni Sa, analyst with global industry consultancy CSM Worldwide.

Tengzhong, formed in 2005 through several mergers and which has less than 5,000 employees, is being supported in its Hummer bid by Suo Lang Duo Ji, a Sichuanese entrepreneur who will own 20 per cent of Hummer.

GM promotes Girsky


General Motors said it has named board member Stephen J Girsky Vice-Chairman of corporate strategy and business development.

The promotion likely means an even bigger role for Girsky, 47, a longtime Wall Street auto analyst who was named to GM's board of directors last July representing the United Auto Workers union.

Chairman and CEO Ed Whitacre – who was a newcomer when he joined GM last summer – has said he relies heavily on Girsky.

"Steve brings a depth of experience to this position that will serve the company well as we continue with our restructuring efforts," Whitacre said. "He is a trusted adviser who has made a major contribution through the company's transition."

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