GM To Deal Hummer to Chinese Machinery Manufacturer
By Michelle Krebs June 3, 2009By Bill Visnic
General Motors Corp. confirmed yesterday it has a memorandum of understanding to sell its Hummer brand and assets to China's Sichuan Tengzhong Heavy Industrial Machinery Co., Ltd a privately held company that makes heavy-duty industrial equipment.
In a statement, GM said Tengzhong intends to retain Hummer's current production capabilities (a GM assembly plant in Shreveport, Louisiana, that also builds GM's midsize pickup trucks -- the Chevrolet Colorado and GMC Canyon) and management team. GM said the deal could save 3,000 U.S. jobs.
"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," said Yang Yi, CEO of Tengzhong, in the GM-released statement.
Yang also said, "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."
The statement said Tengzhong also plans to globally expand the Hummer dealership network, "particularly into new and underserved markets such as China."
Financial terms were not disclosed, but some reports have pegged Tengzhong's investment at less than $500 million.
If the deal comes to fruition, there are many pertinent details that will be of interest to two of GM's eventual new owners, the U.S. government and the United Auto Workers (UAW) union. If Tengzhong truly plans to maintain Hummer production in Louisiana, it likely would be under contract with GM and its UAW-represented labor force. But at current Hummer sales rates, it is difficult to envision the potential for even short-term sustainability under that structure -- Hummer sold 1,094 vehicles in the U.S last month and just 5,113 through May.
And Tengzhong's stated ambition to develop new, "more fuel-efficient" vehicles and expand into other world markets is certain to be a costly endeavor not supported by Hummer's current sales volumes and market penetrations. China, for one, currently has policies that make importation of fully assembled vehicles a prohibitive exercise.
Photo by GM
Hummer H3T will be made by GM for now but sold by a Chinese company.
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