GM signs deal to sell Hummer to Tengzhong
Written on October 10, 2009
General Motors Co signed a deal on Friday to sell its iconic but tarnished Hummer brand to an investment partnership headed by an obscure Chinese machinery maker in an agreement that underscores the fast rise and global ambition of the Chinese auto industry.
The deal with China’s Sichuan Tengzhong Heavy Industrial Machinery caps a year-long struggle by GM to shed a military-derived SUV brand that had become synonymous with gas-guzzling excess.
It marks the first time that Chinese investors have stepped in as buyers into the distressed U.S. auto industry.
The sale also comes at a time when China has emerged as the world’s largest auto market and GM remains majority-owned by the U.S. government after being driven into bankruptcy.
“The long-term game plan is to ride the China wave,” said Jim Taylor, the GM executive who has helped steer the sale and will remain in Detroit as the new company’s chief executive.
The deal remains subject to regulatory review in the United States and China. Chinese officials have signaled that the deal would be treated favorably, Taylor said.
Financial terms were not announced. A person familiar with the deal said earlier on Friday that the Hummer business would be sold for about $150 million, far less than GM’s early estimate that Hummer could fetch more than $500 million.
Under the deal, Lumena Resources Corp chairman and founder Suolang Duoji would hold 20 percent of the investment vehicle buying Hummer cheap pay day loans.
Tengzhong would hold the remaining 80 percent.
The Hummer sale is part of a drastic restructuring plan by GM, which also involves the disposal of its Saab, Opel and Saturn operations as part of U.S. government-sponsored restructuring in bankruptcy.
Tengzhong, a little-known heavy machinery maker, has been in detailed negotiations with GM since it announced an initial plan in June to acquire the premium off-road Hummer brand.
Tengzhong executives, including Chief Executive Yang Yi, have been in Detroit for more than a week for the final round of negotiations after GM missed an initial goal of completing the deal by the end of September.
Aaron Bragman, an auto analyst with IHS Global Insight, said GM’s move to jettison Hummer would help the automaker rebuild its image as more environmentally responsible.
“Hummer has become a bit of an albatross around their neck,” Bragman said.
GM, which emerged from bankruptcy in July after taking $50 billion in U.S. government funding, is cutting its stable of brands in half to focus on Chevrolet, Cadillac, Buick and GMC.
Filed in: money.