Chinese Company Buying G.M.’s Hummer Brand
Hummer vehicles were on display Tuesday at Hummer of Novi, above, in Michigan, one of 153 dealers in the United States. G.M. filed for bankruptcy Monday.
General Motors has reached a preliminary agreement for the sale of its Hummer brand of large sport utility vehicles and pickup trucks to a machinery company in western China with ambitions to become a carmaker.
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The buyer is the Sichuan Tengzhong Heavy Industrial Machinery Company, based in Chengdu, G.M. said Tuesday. The price was not disclosed, but industry analysts had estimated that the Hummer division would sell for less than $500 million.
The deal, expected to close in the third quarter, would make Tengzhong the first Chinese company to sell vehicles in North America, though Hummer’s operations would remain in the United States.
“The Hummer brand is synonymous with adventure, freedom and exhilaration, and we plan to continue that heritage by investing in the business, allowing Hummer to innovate and grow in exciting new ways under the leadership and continuity of its current management team,” Yang Yi, the chief executive of Tengzhong, said in a statement released by G.M. “We will be investing in the Hummer brand and its research and development capabilities, which will allow Hummer to better meet demand for new products such as more fuel-efficient vehicles in the U.S.”
Hummer is one of four brands that G.M., which filed for bankruptcy protection Monday, plans to drop. The company also plans to close or sell Saturn and Saab later this year and to eliminate Pontiac in 2010. G.M. revealed Tuesday that it had 16 bidders for Saturn and three for Saab.
G.M. announced the deal early Tuesday in Detroit but said that the memorandum of understanding would not allow it to reveal the buyer or the price. It confirmed that the buyer was Tengzhong after The New York Times reported on its Web site that the company was seeking approval for the purchase in China.
The White House welcomed the pending sale of Hummer while quickly pointing out that it had not been involved. The transaction “is good news for the 3,000 Americans who will be able to keep their jobs, the two American plants that will remain open and the more than 100 Hummer dealers that should be able to stay in business all around the country,” said Bill Burton, a presidential spokesman.
“As the president said, the U.S. government is not going to get involved in the day-to-day business decisions of G.M. — and this is an example in which it did not,” he added. “This sale came as a result of a commercial process and G.M. reached an agreement that will keep thousands of Americans working in a situation that could have ended instead with a devastating liquidation of this company.”
Tengzhong is a privately owned company, but Tuesday’s deal required preliminary vetting by Beijing officials, who retain the right to veto any effort at an overseas acquisition by a Chinese company and who give special attention to deals of more than $100 million.
Tengzhong is known in China for making a wide range of road equipment, from bridge piers to highway construction and maintenance machinery. But even before the Hummer deal, the company had been moving more into heavy-duty trucks, including tow trucks and oil tankers.
“Over all, we’re pretty pleased,” said a Hummer spokesman, Nick Richards. “If you think about the qualities we’d want in a new owner for the brand, this buyer really met all the criteria. They’ve got a proven track record in international business, and they’ve got a long-term vision for the brand. They’ve got the capital to invest in more efficient vehicles, which is what’s necessary to grow the brand.”
If the deal is completed, it would be the first acquisition of a well-known American auto brand by a Chinese company, after many months of speculation about such a deal. Chinese automakers have already purchased the MG and Rover brands, two of the most famous names in British automotive history.
As a Chinese company, Tengzhong could face a challenge in presenting the deal to American Hummer owners. The brand has long sought to emphasize patriotism, stressing that the Hummer H1 was essentially the same vehicle built in the same factory as the Humvee that carries American soldiers into battle in Iraq and elsewhere.
It was Gov. Arnold Schwarzenegger of California who persuaded the longtime maker of Humvees, A. M. General in Mishawaka, Ind., to build a civilian version. As he recounted at a Hummer news conference in 2001, Mr. Schwarzenegger was filming the movie “Kindergarten Cop” in Oregon in 1990 when he saw a convoy of 50 Humvees drive by and decided that he had to have a civilian model of the same vehicle, which became the Hummer H1.
G.M. bought the rights to the Hummer brand in 1999 and began making somewhat smaller Hummers. G.M. initially procured the H1 from A. M. General, but discontinued the model in 2006.
Under the preliminary agreement announced on Tuesday, G.M. will initially continue to manufacture Hummers under contract for Tengzhong, which will then market them around the world. G.M. will continue making the H3 and H3T models in Shreveport, La., through the end of next year and the company said it might enter into a long-term agreement to build Hummers and important parts for Tengzhong.
Tengzhong plans to shift additional production of the H3 from a plant in South Africa to Shreveport, G.M. said.
Tengzhong could bring Hummers to the crowded streets of China’s cities, although the vehicles would face the 40 percent tax that China imposes on cars, sport utility vehicles and minivans with engines over 4 liters.
Once considered the ultimate muscle car, the Hummer became a symbol of what was wrong with G.M. and the American auto industry — big, bulky and gas-guzzling. Sales of Hummers fell 51 percent last year, the worst drop in the industry, and are down 67 percent so far in 2009.
Mr. Richards said the buyer planned to continue selling Hummer’s current lineup as it developed more fuel-efficient vehicles. The brand will eventually sell trucks fueled by diesel, ethanol and other alternative fuels, he said.
Derek Scissors, a research fellow at the conservative Heritage Foundation in Washington, said that the Obama administration should review the Hummer sale on national security grounds to make sure that no sensitive technology from the Humvee is transferred to China.
But with the H1 discontinued, the Hummer brand essentially consists these days of G.M. S.U.V.’s with military-looking sheet metal.
In a telephone conference call, G.M.’s chief financial officer, Ray Young, said G.M. had been approached by 16 parties that were interested in bidding on its Saturn division. The group includes financial investors and companies that are interested in distributing Saturn vehicles.
He said G.M. had not set a date when it would winnow down the group to a handful of finalists, or when it hoped to announce a sale. One complication is devising the right operating plan for an independent Saturn, he said.
G.M. said it would work with the bidders to come up with the right idea. Mr. Young said that G.M. was using advisers and that prospective bidders also had retained advisers, but he would not be more specific.
G.M., which will be 60 percent owned by the federal government after exiting bankruptcy, will keep four brands: Chevrolet, Cadillac, Buick and GMC.
Shearman & Sterling is providing legal advice to Tengzhong, and Credit Suisse is the Chinese company’s financial adviser. G.M.’s adviser is Citigroup.
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