GM Agrees to Sell Hummer to China's Tengzhong
Saturday, October 10, 2009
General Motors has reached an agreement to sell its Hummer brand to Sichuan Tengzhong Heavy Industrial Machinery, the company announced Friday.
The American automaker, now largely owned by the U.S. government, has been shedding brands in an effort to refocus its operations.
It recently announced that it would wind down the Saturn brand.
The price for Hummer was not disclosed, but according to sources familiar with the negotiations, it was $150 million, far less than the $500 million price once envisioned.
For a transition period, GM will continue to make Hummers and help manage the company in a deal that will "secure" more than 3,000 U.S. jobs, according to GM.
"Hummer is a strong global niche brand and this agreement signifies another important milestone in writing the next chapter for both GM and Hummer," GM chief executive Fritz Henderson said in a statement.
The transaction is subject to regulatory approvals by government agencies in the United States and China, the company said.
If the deal is consummated, GM's plants in Shreveport, La., and Mishawaka, Ind., will continue to make the vehicles until June 2011, with an optional one-year extension.
Tengzhong intends to buy Hummer through a company in which it will hold an 80 percent stake. Suolang Duoji, a private entrepreneur, will hold the other 20 percent stake, GM said.
Tengzhong expects to spend an additional $800 million to $2 billion to bolster Hummer and establish a manufacturing facility in China, said one of the sources, who asked to remain unnamed to preserve business and government relationships.
The source said Tengzhong has ambitious plans for Hummer, perhaps including a cheaper mass-market version for Chinese motorists.
"How can Tengzhong run an auto business?" he said. "It's like a child riding a bicycle and the agreements with GM are the training wheels."
The gas-guzzling Hummer was a lucrative GM brand when fuel prices were low in the early part of the decade, but last year's spike in prices dampened demand.
GM vowed when it went into bankruptcy earlier this year that Hummer would be one of the brands it would sell. At the time, it estimated that it might receive as much as $500 million for the line of off-road vehicles.
Tengzhong's quest to acquire Hummer has been seen by many as a test of China's commitment to reining in emissions of greenhouse gases. Some observers expect China's regulators to bar the acquisition.
Mufson reported from Beijing, Whoriskey from Washington.