HUMMER Sale Nixed By China; GM Gets New Offers?

February 25, 2010
2010 Hummer H3T

2010 Hummer H3T

UPDATE:  GM has just confirmed the sale to Tengzhong will not take place and that it will begin wind-down operations for the HUMMER brand. More to come -- the entire release follows at the end of this post.

UPDATE 2: The Wall Street Journal says that General Motors is evaluating two late offers for the HUMMER brand. We're in the process of checking out the WSJ piece, and we'll post our take on the possibilities shortly.

General Motors is having a win-some/lose-some kind of week: a day after the company wrapped up its drawn-out sale of Saab, GM has confirmed that its attempts to sell another brand -- HUMMER -- have been foiled by the Chinese government.

Not to toot our own horn, but we've been suspicious of GM's arrangement with Sichuan Tengzhong Heavy Industrial Machinery Co. for a while. Discussions between the two companies have dragged on for a very long time, even though the HUMMER sale was approved by GM and U.S. regulators months ago. The only hurdle left to clear has been winning the elusive approval of the Chinese government -- though curiously, China's Ministry of Commerce has consistently said that it never received an application from Sichuan Tengzhong to approve the sale. We became even more skeptical of the deal when no agreement had been reached by GM's self-imposed deadline of January 31, which GM opted to extend to the end of February. This morning, we envisioned three possible outcomes of the situation:

1) China's Ministry of Commerce could be telling the truth, in which case Sichuan Tengzhong could file the necessary paperwork and earn approval.

2) Sichuan Tengzhong could wash its hands of the whole deal and walk away from the bargaining table, in an effort to save face before China 86es the deal.

3) China's Ministry of Commerce could have quietly killed the sale some time ago, leaving Sichuan Tengzhong to give up the sale entirely or to pursue alternate means of acquiring HUMMER.

Outcomes #1 and #2 were pretty unlikely. If the lag were the result of a simple bureaucratic slip-up, Sichuan Tengzhong would've resolved the situation ages ago. And given the energy and resources that Sichuan Tengzhong has put into the deal, it's unlikely that the company would've back out without a fight.

Outcome #3 seems to have the final result. The Chinese government isn't known for its transparency, so Beijing likely nixed the deal some time ago without going public. Why would China do such a thing? Well, for starters, China is already home to an abundance of automakers -- around 100 at last count -- and with car sales projected to decline from their unsustainable highs of 2009, the government would understandably like to see the number of manufacturers shrink. Adding another automaker to the mix -- especially one with zero experience in the auto industry -- would run counter to China's goals for the sector.

Also, China has said very publicly that it is moving toward greener environmental policies. In fact, the government is urging consumers to purchase smaller vehicles, and it's offering sales tax reductions to get them to do so. Unfortunately for HUMMER, China views the company and its vehicles as environmentally unfriendly.

So, what's left for HUMMER? An orderly wind-down, as GM puts it, along the lines of those planned for Pontiac and Saturn. True, Saab was saved at the last minute -- but it was saved by a government keenly interested in preserving thousands of jobs. Only the state of Louisiana or Indiana, where some HUMMERs are built, could leverage what's left of the brand in a last-ditch effort to rescue it, and neither seems likely to do that. Even if Louisiana's small-government-minded governor were keen on the idea, the state probably lacks the capital and other resources to jump in. Indiana isn't under much pressure to save the automaker, since it already has Honda, Subaru, and Toyota plants humming within its borders.

Of course, the bigger story in all this may be that China seems VERY serious about going green. That should please environmentalists, given China's abysmal record on pollution. It should also please eco-car enthusiasts: with China's robust economy and auto market, this could speed the deployment of hybrids and EVs. Ironically, the conservative country that may lose Google over censorship concerns may also become the world leader in a new, green economy.

[TheCarConnection, with information from BusinessWeek, Automotive News]

* * * *

DETROIT General Motors today announced that Sichuan Tengzhong Heavy Industrial Machines Co., Ltd. (Tengzhong) was unable to complete the acquisition of HUMMER.  As a result, GM will begin the orderly wind-down of the HUMMER operations.

“One year ago, General Motors announced that we were going to divest HUMMER, as part of focusing our efforts on Chevrolet, Buick, GMC and Cadillac going forward.  We have since considered a number of possibilities for HUMMER along the way, and we are disappointed that the deal with Tengzhong could not be completed," said John Smith GM vice president of corporate planning and alliances. "GM will now work closely with HUMMER employees, dealers and suppliers to wind down the business in an orderly and responsible manner." 

GM will continue to honor HUMMER warranties, while providing service support and spare parts to current HUMMER owners around the world.

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