Wednesday, June 3, 2009

China Firm to Buy Hummer

By JOHN D. STOLL, SHARON TERLEP and NEIL KING JR. An obscure Chinese construction-equipment maker plans to buy Hummer -- a brawny symbol of America across the globe -- from General Motors Corp. in a deal that presages the future shape of the international auto industry. The prospective buyer, Sichuan Tengzhong Heavy Industrial Machinery Co., was announced a day after GM filed for bankruptcy protection in the U.S., and almost a year after the company put Hummer on the block. GM's Hummer brand, which traces its lineage to the military vehicle known as the Humvee, was born in 1998 amid America's swelling appetite for sport-utility vehicles. The massive Hummer H2 dwarfed most other cars on the road and for a time fit the national mood, amid low fuel prices and dotcom-era exuberance. That sentiment waned after gasoline topped $4 a gallon. Tengzhong is buying the Hummer brand from GM, not the military Humvee, which is made by AM General Corp. of South Bend, Ind. The price wasn't disclosed but is expected to be less than $500 million. GM estimated the sale will preserve 3,000 U.S. jobs in factories and dealerships. That a Chinese maker of dump trucks and asphalt spreaders is acquiring a brand that in some ways symbolizes America's military might is likely to be seen as a reflection of China's rise as a global power. But China's embrace of a brand notorious for gas-guzzling will also spotlight China's own struggle to contain the environmental effects of a growing obsession with the automobile. Yang Yi, Tengzhong's CEO, emphasized the attraction of the deal in a statement on the firm's Web site. "The Hummer brand is synonymous with adventure, freedom and exhilaration, and we plan to continue that heritage by investing in the business," he said, while also hinting at more fuel-efficient products. In an interview, Hummer's chief executive, Jim Taylor, said Tengzhong plans to leave the bulk of the Hummer operation in the U.S. but has committed significant investment to fund the brand's future and expand its international presence. Meeting stricter fuel-economy rules, set for middecade, was a key consideration in GM's move to dump Hummer. By pulling the brand's hulking SUVs out of its lineup, its corporate average fuel economy, or CAFE, will fall. Mr Taylor said that electric powertrains could help Hummer meet CAFE rules down the road. Journal Community Vote: Can GM thrive post-bankruptcy?Yes No The Obama administration applauded the planned sale, saying it met two of the government's key aims: seeing GM shed its less-profitable assets, and preserving U.S. jobs. The sale "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 William Burton, a White House spokesman. Officials said the government had no part in the discussions with Tengzhong and was simply notified of the deal by GM as it was nearing completion. In the past, some Chinese attempts to invest in U.S. corporations have raised jitters. In 2005, the Chinese state-owned oil company CNOOC Ltd. withdrew an $18.5 billion bid to buy Unocal amid a frenzy of concern on Capitol Hill. However, other investments have sailed through -- including two by China's main government-investment fund in Morgan Stanley and private-equity firm Blackstone Group L.P. In Hummer's case, Tengzhong is a private company, mitigating against any of the concerns raised when state-owned companies have looked to acquire large U.S. companies. In China the overseas acquisition will require approval from the government, which lately has been pressing Chinese auto companies to make smaller, more efficient cars. China's auto makers have grown quickly in recent years, and several have shown aspirations to expand by buying foreign firms. Parting with Hummer should help GM as it tries to craft a new, more positive image with consumers, politicians and regulators in the U.S. and world-wide. In many circles, the Hummer came to be seen as a symbol of GM at a time when rivals such as Toyota Motor Corp. were winning accolades for pushing out more fuel-efficient hybrid gasoline-electric cars like the Prius. Hummer's prospective new owner, Tengzhong, makes road, construction and energy-industry equipment, but doesn't make automobiles. Tengzhong traces its current form to the 2005 acquisition by the company's owners of Sichuan Changdian Electric, a 40-year-old, formerly state-run company. Tengzhong has since grown through a number of domestic acquisitions. Credit Suisse is advising Tengzhong, while Citigroup is advising GM. GM chose Tengzhong over several other interested buyers because it has the money to commit to Hummer's long-term growth, Mr. Taylor said. Write to John D. Stoll at, Sharon Terlep at and Neil King Jr. at

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