Manufacturing News

Hopes low on near-term China approval for Hummer deal

Hopes China's Tengzhong will complete the deal to buy General Motor's Hummer brand as early as this week appear unlikely to be fulfilled, with the regulator tasked with assessing the deal yet to receive a formal application, according to a regulatory source.

Nearly two months have passed since GM signed a deal to sell its iconic but tarnished Hummer brand to Sichuan Tengzhong Heavy Industrial Machinery, an obscure Chinese machinery maker.

Hummer's CEO Jim Taylor told Automotive News last month he hoped a deal would be closed by Dec. 1 but the deal needs approval from China's Ministry of Commerce, which is still awaiting documents from Tengzhong.

"We have not received formal application materials from Tengzhong," said an offical at MofCom, who asked not to be identified due to the sensitivity of the matter.

"The Tengzhong-Hummer issue is not on our agenda yet," the official told Reuters.

However, Tengzhong said it had been in touch with the Chinese government since before closing the landmark Hummer deal with the Detroit automaker in early October.

"We have been cooperating with the government all along and have submitted whatever materials needed for the approval," said a Tengzhong representative.

"There is little we can do at this stage. We can only wait."

A MofCom spokesman declined to comment.

ROCKY ROAD

Chinese manufacturers are venturing on to the global stage with bids for Western brands to take advantage of a steep industry downturn, but there remain doubts on whether they can handle such deals given their lack of expertise and limited international exposure.

For Tengzhong, the challenge is even greater, as on top of turning around GM's struggling gas guzzler, it needs to clear regulatory hurdles for a deal which runs counter to China's energy efficiency drive.

Taylor, the GM executive who has helped steer the sale and will remain as the new company's chief executive, was told that approval would take four to six weeks after closing the deal, according to Automotive News.

Analysts say the apparent foot-dragging by the commerce ministry suggests there are opposing voices in the Chinese government against the Hummer deal even though it is premature to ring the death knell now.

"Obviously regulators in Beijing can't see eye to eye on the Hummer buy as it's a brand going down hill globally," said Boni Sa, an analyst with international industry consultancy CSM Worldwide.

The lack of details disclosed in the sales agreement, including the financial terms, also raised question marks.

"All we know is that Tengzhong owns the Hummer brand and the right to use the technologies. And that by itself does not sound like a good deal," John Zeng, an analyst with consulting firm IHT Global Insights.

Hummer has its origins in a multipurpose vehicle known as the Humvee that was used by the U.S. military. GM bought the brand in 1999 and its sales peaked in 2006, but they have been hit hard since then by a slumping U.S. economy and higher gas prices.

Through September, its U.S. sales were down 64 percent this year.

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